France’s Public Debt: Set to Reach 118% of GDP in 2021

Back in June 2019, a France 24 headline said:

Rising French debt is 'worrying', public auditors warn

That was when France's debt-to-GDP ratio was "set to reach 98.9 percent" in 2019.

Now, here in April 2021, expectations are that France's debt-to-GDP ratio will reach 118% (possibly higher) this year.

Here's an excerpt from an April 4 Reuters article:

France's public deficit is expected to reach 9% of gross domestic product (GDP) in 2021, French Finance Minister Bruno Le Maire said on Sunday, up from a previous forecast of 8.5% as the country enters its third national coronavirus lockdown.

The change follows a downward revision of France's growth forecast from 6% to 5% for this year, taking into account the effect of new restrictions throughout April brought in to tackle the COVID-19 pandemic. Schools are set to shut and non-essential shops have closed.

Le Maire, speaking on LCI TV, said France's public debt was set to reach 118% of GDP this year, up from its latest forecast of 115%. In yet another estimate before that, Le Maire had said in December public debt could reach 122% of GDP.

Like many countries in Europe, France has ploughed billions of euros into propping up struggling companies with state-backed loans as well as helping them with rents and partial unemployment schemes.

Elliott Wave International's February 2021 Global Market Perspective offered this angle on France's public debt. Here's a chart and commentary:


French debt just exploded to nearly 120% of GDP, while Germany's debt-to-GDP ratio has actually fallen over the past decade. As we have said before, divergences like these are a recipe for friction that will eventually bring an end to the European Union as we know it.

We keep stumbling upon a few misguided narratives that say businesses were well prepared for the pandemic, that economies have turned a corner, and that it is only a matter of time before national economies return to pre-pandemic growth rates. This view was put best last month by a financial services partner at a large UK law firm, who told Bloomberg: "The fact that we have not seen large-scale failures after 10 months of disruption is hopefully testament to how [capital and liquidity rules] have operated as they are intended to." (FT, 1/7/21)

In our view, it is precisely because businesses carried so little cushion that governments were forced to step in and prop them up in the first place.