The Cour des Comptes warned that the public debt, which is set to reach 121% of GDP in 2020, will only return to already-high pre-crisis levels at an “extremely gradual” rate, even in a best-case economic scenario.
Official estimates suggest the French economy will contract by 11% this year, and the public sector deficit is expected to reach 11.4% of GDP after the government spent €57.5bn to fight the health and economic crisis.
The auditor said the deficit could be reduced when the economy opens back up and revenues increase following Covid-19 – but added that the debt level would remain high for some time.
“France’s public-debt-to-GDP ratio, which increased in previous recessions without being reversed thereafter, [enters] the 2020s at a high level, both in historical comparison and in relation to our international partners,” the auditor stated in its regular outlook report on the country’s public finances.
“The return of the economy to a more normal functioning gives hope for a clear reduction in the deficit compared to the exceptional level of 2020. However, the movement of the pendulum will lead, in the best of scenarios, only to an extremely gradual return of our debt level.”
In less favourable “but rather more plausible” scenarios, the report suggested the deficit would remain high, and debt would not be under control.
France’s public debt skyrocketed after the global financial crisis of the late 2000s, and has not reduced in recent years as quickly as many other similarly sized European economies.
To avoid the same happening again, the auditor called for a new public finance strategy “that ensures debt sustainability”, while being pursued steadily within a multi-year framework.
“As a priority, it should ensure the general improvement in the quality of public spending, prioritising spending with demonstrated effectiveness and preserving public investment when it is a factor of growth and socio-economic progress,” the cour des comptes said.
