France’s public debt pile grew in the second quarter, official figures showed on Friday, as Prime Minister Michel Barnier’s minority government prepared for a tough budget debate.
New borrowing of 68.9 billion euros ($77 billion) between April and June raised the country’s debt stock to nearly 3.23 billion euros, or 112 percent of annual output, data from the statistics agency showed. INSEE has shown.
These statistics underline the magnitude of the challenge of Barnier, the former European Union commissioner and Brexit spokesman who leads the centrist coalition and the conservative coalition that has increased significantly in the lower house of the National Assembly.
Since the party has split in two since the parliamentary elections in July, the NFP left the coalition and the National Rally (RN) could produce a new government at any time if they come together in a vote of confidence.
There are doubts among financial players about Paris’ ability to get its debt and annual deficit under control.
Ratings agency S&P downgraded France’s creditworthiness earlier this year.
And just this week the yield on French debt — the return investors can expect from holding 10-year government bonds — surpassed Spain’s average for the first time since 2006, pointing to declining investor confidence.
Barnier is expected to lay out his policy in detail on Tuesday in his speech with lawmakers, which will also be closely watched by the markets.
His new budget minister Laurent Saint-Martin said on Wednesday that the draft budget law for 2025 will be introduced “in the week starting October 9”.
“Our public finances are in a very bad state, and I will not succeed,” said Saint-Martin, warning that this year’s budget deficit could be more than six percent of GDP — twice the European Union’s limit.
He blamed tax receipts that were lower than expected and the companies involved in hiring and investment for having a very negative impact, saying that the local and regional administrations spent more money than they had planned.
“We will have to make a big collective effort” to manage public finances, warned Saint-Martin.
Barnier and his team say they aim for more spending cuts than tax increases to right the ship, prompting suspicions of “spending” on the left.
But the prime minister said on Sunday that higher taxes on big companies and the super-rich could be part of the equation.
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