Euro Debt Crisis: Is France next?
France currently plans to return to fiscal sustainability thanks to strong revenue growth. Who wants to bet on a strong growth in France for the coming years?
The chart above shows that the French State fiscal balance is still deep in negative territory. The austerity in France is a sweet one. The reduction in the deficit is coming mainly from revenues growth (up by 6% YoY in May 2011) and the end of special measures (total expenditures down by 3% YoY). But, the financing needs for the coming years will be huge.
With Italy under fire, this crisis has proven that no big country is safe. France has a relatively sound fiscal situation and if the future government respects the targets for the public deficit in the coming years, the debt/GDP ratio should stabilize under 100%.
However, the political situation in France, with major elections next year (President and Parliament), could lead to some complacency regarding the public deficit. The public debt is rising fast (83% of GDP in 2010; 91% in 2012 – OECD forecast). Moreover, a robust revenue growth is crucial in the current plan for fiscal sustainability. Who wants to bet on a strong growth in France for the coming years?