OPINION: Will French debt lead to a Greek-style crisis? Not yet

John Lichfield
John Lichfield - [email protected]
OPINION: Will French debt lead to a Greek-style crisis? Not yet
A protester holds a placard which reads as 'Macron the poodle of the ultra-rich - Macron your slaves will not retreat' as they take part in a demonstration on May Day. Photo by DAMIEN MEYER / AFP

As France's credit rating is downgraded by the Fitch international debt-rating agency, John Lichfield looks at the financial future for the country that hasn't balanced its budget since 1975, and which now has a national debt of 112 percent of GDP.


Ratings agencies are like pub bores. They state the obvious. Bank collapses arrive out of the blue but the ratings agency, Fitch, is troubled by the fact that France is €3,000 billion in debt.

Didn’t we know that already? Isn’t that one of the reasons why President Emmanuel Macron wants the French to retire later and stop piling up deficits in their state pension system?

Isn’t that why Macron has become the least popular French president since, erm, the last French president and the president before that?

On Friday evening, Fitch, one of the four international debt rating agencies, reduced its grade for French state debt by one notch from AA to AA minus. The agency gave several reasons, including the fact that pension reform had generated large street protests, “sometimes violent”.

Fitch cast doubt on whether Macron and the government would be able to carry through the pension reform, or any other reforms. They suggested that the government would have to spend a lot of the people’s borrowed money to appease the people in the next four years.

Government officials are annoyed. They say that Macron, unlike some of his predecessors, has ignored popular anger to impose a later, official pension age. Why, they ask, kick a man when he is doing what you believe that he should be doing?

The finance minister, Bruno Le Maire, has just announced a four-year plan to reduce France's debt mountain from 111.6 percent of GDP to 108.3 percent by 2027.

Why, the officials ask, should Fitch make the government’s task harder? Downgrading French debt will encourage international lenders to increase the interest on new French 10-year loans (now around 3 percent, compared to 0 percent not long ago)


Some of Fitch’s arguments were indeed very strange. It is pretty clear by now that Macron is not going to yield to pressure from the street. The union campaign against pension reform is fading, even if the sullen anger of 70 percent of the country is not.

The unions turned out 700,000 people for Monday’s nationwide marches – very high for a May Day but low compared to the million-plus who joined demos in January, February and March.

A small number of Mélenchoniste and CGT die-hards are making a lot of noise and gaining a lot of amusing headlines by banging saucepans during presidential and ministerial visits. Less remarked has been the decline, or near collapse, of the strike action that was supposed to “bring the country to a halt”.

There have been two CGT “rail workers’ anger days” in the last fortnight. On both occasions, trains ran normally.

As for the savage violence on Monday, I’ve said it before and I’ll say it again. The priggish, black-clad legions who attacked police with Molotov cocktails, lumps of concrete and agricultural fireworks care little about pension reform.


They are anti-capitalist and anti-state more than they are anti-Macron. Many of them are not even French.

And yet and yet…

Fitch does have a point about French debt. It has spiralled alarmingly in the last 15 years. Maybe it was time for the country - and not just the government - to be given a public warning.


France last balanced a state budget in 1975.

Until 2008, accumulated French debt was only a little above the 60 percent of GDP limit imposed on members of the Eurozone. In the four years after the banking and financial crisis, it shot to 90.6 percent (while President Nicolas Sarkozy was lecturing Greece about state profligacy).

When Emmanuel Macron came to power in 2017, the debt mountain had reached 98 percent of GDP. Over the next two years, he brought it down (modestly) to circa 97 percent.

Not for long. The splurge of “whatever-it-takes” spending to keep the economy afloat during the Covid pandemic cost circa €200 billion. This was followed last year by €100 billion in subsidies to insulate France from the worst of the post-Ukraine war spike in energy prices.


As a result, the accumulated debt is now approaching 112 percent. “Free money” is a thing of the past. Rising interest rates mean that the servicing French state borrowing has reached €50 billion a year, the second highest single state expenditure after education.

Debt, personal or national, is like obesity or drug-taking. It seems under control until suddenly it is not.

Quite apart from the “emergency” spending since 2020, the French state has been living beyond its means for almost half a century. Even the 45.3 percent of GDP which is claimed in taxes is not enough to sustain government spending. The circa 55 percent of GDP spent publicly is no longer enough to pay decent wages to teachers, nurses or doctors.


Macron and his finance minister Bruno Le Maire did not need Fitch to tell them they had a problem. The European Union is restoring from next year its debt and deficit rules for countries which use the Euro.

Brussels has proposed a somewhat softer new regime in which heavily endebted countries can negotiate their own path to solvency. Germany, whose own debt has soared to 66 percent of its GDP, wants tough, uniform rules for all.

Le Maire has announced a four-year plan to “cool” French state spending and bring the annual deficit within the 3 percent of GDP annual limit by 2027. How can he do that when Macron has announced ambitious spending plans for defence, health and education?

All ministries have been asked to identify 5 percent cuts in their budgets. The aim is to try to keep overall spending – after the Macron-promised rises in some areas – to 0.8 percent below the rate of inflation. In other words, the government hopes that rising prices will disguise some of the pain of four years of austerity.

Good luck with that. The Left and Far Right opposition blocs in parliament will accuse Macron of bowing to “Europe” and “big finance”. The centre-right says that France is “dancing on a financial tight-rope” but cannot deliver its own troops to vote for a modest pension reform.

Both Jean-Luc Mélenchon and Marine Le Pen have heroically incoherent economic programmes (including retirement at 60 or 60-62). They say that France’s financial problems can be solved at a stroke by “higher taxes on the rich and business” (Mélenchon) or “ending payments to immigrants” (Le Pen).

Is France heading the way of Greece? Not yet.

But Fitch may have started a process which will put deficits and debts at the heart of the 2027 presidential election campaign. If 70 percent of the country remains in ostrich-mode, Paris might  become the “Athens of the North” in the next decade.


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Bryan Woy 2023/05/04 17:11
Very interesting article as always, but please allow me to question the translation in the caption to the photo. "Macron la boniche des ultra riches. Macron tes esclaves ne veulent pas de ta retraite"...well I guess "boniche" could be translated as "poodle" in the context, (a poodle is actually a "caniche") but a more accurate translation might be "Macron the skivvy of the ultra-rich. Macron, your slaves want nothing to do with your retirement plan"
Simon Melville 2023/05/03 18:08
Probably the best John Lichfield article I’ve read. Realistic and factual. The debt to GDP comparison with Germany reveals a staggering difference between the (post-Brexit) two main economic powerhouses of Europe. As a second home owning Brit in France, I hope Macron is successful with his pension reforms.

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