Budget Deficits Globally: Focus on France

Global government debt will reach around 95% of global gross domestic product in 2025 — and the trend continues to rise. By 2030, the value could be close to 100%.

Governments' budget deficits are expected to average 5.1% of GDP in 2025 — for years to come.

Worse, the trend of rising government debt has become irreversible as real economic growth is too low, inflation is insufficient and the willingness to save worldwide is low.

Inside the EU, the development in France is particularly dramatic. Just 15 years ago, the country was as deeply indebted as Germany. Now, France’s national debt stands at 113% of GDP and the current annual budget deficit is a good 6%.

In reality, France is even worse off than the official debt statistics suggest. Hidden pension burdens are inserted into the budgets of all government ministries as regular expenditures.

According to a study by the Institut des Politiques Publiques (IPP), around 18 billion euros are shown annually as civil servant salaries, although in truth they are not spent as wages, but for civil servant pensions.

To make matters even worse, within a period of only twelve months, the third French government is expected to fail because of the inability among politicians to find a majority supporting a path of the urgently necessary budget consolidation.

As political polarization and refusal to support reform paralyze France, the interest rate spread, i.e., the difference between interest rates on ten-year French government bonds compared to German government bonds, has risen accordingly.

However, Germans have little reason to look too arrogantly at France.

Its own, now past path toward a series of no budget deficits was not a matter of political achievement, but rather the consequence of the what-ever-it-takes policy of the European Central Bank (ECB), which pushed down interest costs and boosted exports via the weak euro.