These last days, the government and INSEE have given a large set of data allowing to having a more precise vision about France financial situation. INSEE had published at the end of September the figures of the national assets and of the development of the public debt. The government has sent to the Parliament its finance bill project for 2024 which gives a description of the budget deficit evolution and of the State debt charges. It is these last figures which have mainly attracted attention in an inflationist context which remains high and after the rates increases decided for one year by the European Central Bank.

The State debt charge is the adding of three components. The main one is constituted by the interests paid on the mid and long-term debt. It slowly evolves because the rates are fixed ones and the reimbursement of the long-term bonds issued in the past with rates superior to the issued new bonds ones could have as a result a reduction of the debt charges the following years. It is what has allowed, these last years, despite the high increase of the indebtedness, their stability and even some years their reduction.

The second component comes from the short-term Treasury Bonds. The rate trends, largely dependent of the European Central Bank decisions, have, to the opposite, an immediate impact. The cost of the Treasury Bonds, which had been negative or nil for several years, progressively re-appeared since 2022 second half. It will be one of the main causes of the increase of the debt charge in 2023 and it will continue to weight on it in 2024.

The third component occurs at the maturity of a bond indexed on French or on eurozone inflation; these last years, the State thought it was making a good deal. The proposed interest rate was symbolic, most of the time 0.1% but the saving with the inflation proved to be an illusion and will heavily weight on the futures charges. The quoted figures of France-Tresor Agency, which manages the State debt, do not include the expenses of dependency organisms as the one which is in charge of the COVID debt.

In 2022, the State debt charge, all components included, has been near 40 billion euros, with 33.2 billion regarding interests paid for mid and long-term bonds and 4.9 billion regarding the indexation charge on a bond coming at maturity in July. Treasury Bonds rates being back to a positive level during the year, paid interest rates have been near 2 billion.

In 2023, related figures given by the AFT are 32.7 billion regarding the mid and long-term debt and 5 billion for the indexation charge and the treasury Bonds interests, i.e. a total of around 43 billion. Forecasts for 2024 give a continuation of the increase of mid and long-term interest charges (35 billion), and of the Treasury Bonds, under the hypothesis of a slowing of the rises decided by the ECB (6.6 billion) and an indexation charge of 5 billion, i.e. a total of 47 billion.

These figures generate two remarks. The debt charge comes less from the increase of the State indebtedness than from the financing policies which are hardly understandable. There are first the issuances before the Covid crisis carrying rates largely above market ones which increase the current charges. Atop of that, the cashed issuances premiums which were coming from these artificially high rates went to feed the State treasury which, so, has less borrowed with short-term maturities at a time when conditions were especially favorable. Treasury Bonds share of total issuances fell from 13.5% in 2012 to 7% in 2022.

There is next the choice to issue bonds indexed on inflation. Their bill, at a time when they come at maturity, is for two years a major cause of the increase of the State debt charge. It is surprising, especially in the current situation and knowing that this indexation is mainly based on the eurozone inflation, which is superior to France one, that the authorities continue in this direction.

These figures so are as worrying as the evolution of the budget deficit and they are not without link with the decision of the rating agency Fitch to downgrade France notation. Even if Standard & Poors has not changed its one, we expect with some worry the next Moody’s decision. But the figures are not the only criteria to take into consideration to assess the country financial strength.

At the end of 2022, the net public debt was 2674 billion euros, a figure obtained after the removal from the Maastricht Treaty definition, of the deposits, the credits and negotiables debt stocks detained by the public administrations. The household financial assets were 6360 billion euros, shared almost equally between deposits and saving plans, life insurance and shares. Knowing that it is the taxes on household which are the main source of the State and of the local authorities receipts, the ratio between that net public debt and the household financial wealth can constitute a good solvability indicator.

At the end of 2022, it was 42%. Ten years ago, in 2012, when France was facing the euro crisis, it reached 39%. Even if these financial assets are shared with a growing inequality, we must notice that the accumulation of the household wealth has been almost as important than the public debt increase. The phenomenon was easy to note at each publication of the yearly economic accounts of the French economy. For three years, the level of household financial saving rate has been very high. That occurred with an accumulation of the deposits in banks and later with a transfer toward the A Passbook when its rate increase has been announced. The life insurance contracts remained at a level near 2 000 billion.

The household saving rate in 2023 will be near 19% of the net available revenue, i.e. 4 points higher than in 2019. That increase has mainly concerned financial saving. The trend would accelerate in the future with the persisting increase of borrowing costs which make home acquisition, another utilization of the saving, even more difficult. This level is all higher than it doesn’t include, to the difference of other countries like Germany which have pension funds, the pension contributions which also constitute a kind of saving.

France situation is fundamentally that one of a wealthy country. It will remain under two conditions. To stop alarmist talks which worry financial markets, which leads to increase financing costs. The spread with Germany for 10 years bonds was structurally equal to 30 basis points. It has reached at the beginning of October 56 basis points. To better manage the public debt and the public finances. It will be a long term job which, to be successful must give the priority to appropriate actions and not anymore to communication.