The French economic nonsense

The French economy accelerates in its crazy mode. The cost of financing its debt is around 5%, very close to the US record. The risk premium, or additional return demanded by investors in relation to Germany, has fluctuated this week between 138 and 143 basis points: the financial cost of a French company thus exceeds that of the German company by 1.4%, that competitive disadvantage. And what is very significant: it largely doubles the Spanish, which moved around 62/63 points.

The core of the problem lies in the atavistic inability of the second euro country to contain its public finances: the deficit, and the debt that it fuels. Emmanuel Macron's mandate, marked by extreme volatility of prime ministers, seven in nine years, at a rate of 1.2 per year each, stands out for its inability to reduce debt: since 2017 it has increased it by 20 points, to 119% of GDP; while Spain reduced it by just over one point (to 99.9%).

But more key is its rigidity in digesting the peaks of new debt contracted in the face of crises. Like the one caused by the pandemic. The French maximum exceeded 114% of GDP in 2020 and has still worsened another five points, to 119% today. While Spain has reduced its peak of 119% that year, by a total of 20 points, to the current 99.9%. Reverse trajectories.

The different balances of debt and deficit are due to the intersection of two also contrary trends. On the one hand, French growth has been weaker, and close to stagnation in recent years. Between 2017 (Macron's first half year) and 2026, France's GDP will have grown by 9.5%, about half that of Spain (18.1%). Very similar if we take the reference of 2018, Sánchez's first half year (7.6% French against 15.3% Spanish). And the French GDP per capita has also grown less than the Spanish: although only three points, given the high increase in population on the peninsula through migration: more heads to share.

On the other hand, the different sign of public spending. France has maintained its traditional high level, above 57% of GDP. Spain has closed nearly half of its classic gap with the European average: it has increased it four points, from 41% of GDP to 45.3%, that engine of growth. Thanks largely to the increase in tax collection, which has made possible an expansive demand policy while improving public finances.