This is an unprecedented amount. The French State plans to raise 270,000 million euros of debt in the financial markets in 2023. France exceeds its previous record of 260,000 million euros in 2021 and 2022, according to a press release from Agence France Trésor presented on Monday.
In 2023, the State must raise 305.5 billion euros to finance itself and finance the cost of these loans, compared to 306 in 2022. If the figure remains stable, France can no longer rely on the precautionary cash flow constituted in 2020 The slight reduction in the State deficit (which should be reduced from 172.6 in 2022 to 158.5 billion euros in 2023), is offset by the need to renew previous loans that mature in 2023.
The cost of debt is getting higher
However, the debt burden of these new loans is increasing, a trend that is set to continue to worsen. interest rates, called ” sovereign rates » that France pays its creditors to lend them money, are getting higher and higher. This can be explained more by the tightening of monetary policy by central banks, in particular the ECB in Europe and the Fed in the United States, than by the financial markets’ fear of France’s solvency.
“Despite a very high volume of debt, France still enjoys great credibility in the financial markets, which do not believe in a tricolor default at all. Its government is stable and it has the second largest economy in the eurozone.summarized economist Eric Dor for The galery.
Additional cost for public finances
Clearly, France is borrowing an ever-increasing volume of money on the financial markets, at an ever-increasing rate compared to the last decade. The rise in interest rates has a relatively limited impact in the short term. Most government bonds (loans taken out by the government in financial markets) come due for repayment after several years, usually 10 years. But once the term has arrived, a 1% rise in interest rates on a 10-year loan entails an additional cost of 40,000 million euros. Or the equivalent to the annual budget of the Armed Forces.