Understanding Public Deficit and Debt in France

Extract

[...] The public deficit causes the public debt. We define this first notion as the difference between revenues and expenses over a year (and also explain that this amount corresponds to a financing by loan of the State on financial markets. The public debt translates the accumulation of past deficits with a particularly deleterious additional factor: the debt burden (interest payment charge) which is variable depending on the economic context and the ratings given by agencies Moodys, Fitch etc.). We can answer and summarize as follows: the deficit is an annual flow while the debt represents a total financial volume. [...]

[...] Despite the government's efforts to stabilize this increase and even start reducing the deficit (with only a slowdown in the increase in debt), the global economic context has impacted the French economy (Russian-Ukrainian war, resource tensions, etc.) with, in particular, an imperative for energy transition that has strong impacts in terms of spending: this is what explains the end of subsidies in Germany for the purchase of electric vehicles . but also the strong budget cuts imposed on energy transition projects in the French economy. It is planned to return below by 2027, but achieving this forecast is more than uncertain. [...]

[...] The culture, particularly French, of the permanence of public service and social insurance (retirement, unemployment, and health insurance) financed by national solidarity, shows this ambivalence between liberal-inspired measures on a welfare state background." Q31. The data clearly shows that French public finances are not at all balanced for 60 years. One can explain the fact that public spending regularly exceeds revenue by an adaptation of the latter ex-post in the evolution of the first. Musgrave shows that this gap often results from political choices and we add that the post-thirty glorious context has added to this dynamic by a slowdown in growth and therefore, the associated fiscal revenues. Q32. [...]

[...] Public Deficit and Debt Q28. The 2024 budget aims to reduce the deficit in two ways. Firstly, by reducing public spending by 3.6% compared to 2023, and secondly through measures to increase tax revenues billion euros). This approach is in line with a liberal perspective, similar to neoclassical theories that advocate for a lesser, or even minimal, state intervention in the economic landscape (the market). Authors such as Mankiw or Krugman have notably studied the fact of reducing public deficits through a reduction in state spending. [...]