With heated discussions over the 2025 budget in the National Assembly, the issue of public debt has once again been in the spotlight. Beyond its high level (112% of GDP), the debt is worrying due to the growing costs it generates for the State, forced each year to repay a part of it, increased with interest. According to Bercy’s forecasts, this “debt burden” should increase significantly in the coming years, from 46 billion euros – for a total of 3,230 billion – in 2024, to 75 billion in 2027.
“The public debt (…) It presents an increasingly high cost that limits all other expenses, overloads the country’s investment capacity and dangerously exposes it in the event of a new macroeconomic shock.the Court of Auditors warned in July. “If we do nothing, [les frais de remboursement de la dette] “It will become the first item of State spending”warned the Minister of Economy and Finance, Antoine Armand, when presenting his finance bill. How do we get here? Should we be worried?
How was France’s debt created?
The State borrows recurrently to finance public operating and investment expenses. You borrow, pay interest (“coupons”), repay when due, and apply for new loans.
Historically, France has resorted to various forms of borrowing, for example by drawing on the savings of the French, freely (the “Balladur loan” of 1993) or restricted (Pierre Mauroy’s “forced loan” in 1983), or requiring banks to buy their debt. But today it borrows mainly in the financial markets.
It is the Agence France Trésor (AFT), located in the heart of Bercy, that is in charge of managing these operations. The AFT warns investors that there will be a need for financing. Each player says how much they are willing to contribute and, based on the offers, the AFT assigns them lots with the most attractive prices for them.
What does the debt burden currently represent?
Every year, France must pay interest to its creditors on the debt it has incurred: these costs, called “debt burden” or “debt service”, are considered one of the expenses of the state budget. With 54.9 billion euros of commitment authorizations in 2025, according to government projections, this position should represent the fourth item of public spending, well ahead of the security or ecology budget, but behind national education, the defense or tax refunds to companies and individuals (under tax loopholes or incentive systems).
Figures from the finance bill (PLF), presented in “budget accounting”
The budget dedicated to the repayment of state debt, which should represent around 1.8% of GDP in 2025, has increased significantly in recent years: in 2018, it still represented only 35.2 billion. And this trend is expected to continue increasing in the coming years: the debt burden could represent 75 billion euros in 2027, or 2.4% of GDP. Not to mention that this figure does not take into account the debt burden of local authorities and social security organisations, calculated separately.
What explains the increase in this charge?
The increase observed in recent years can be explained, on the one hand, by the rise in inflation, particularly pronounced during the 2022-2023 period. Indeed, around 10% of state loans granted at variable rates are linked to inflation (French and European). When consumer prices soared, these loans followed: in 2022, these “indexation costs” amounted to 23 billion euros, or almost half of the interest paid during the year. In 2023, however, this amount decreased to €8.9 billion.
The increase in the cost of French debt is also due to the general increase in interest rates in recent years. By raising its key rates to a level never before reached in 2023 to combat inflation, the European Central Bank has raised all interest rates in the euro area, both for States, individuals and companies. Although they later fell in 2024, they remain at a high level. Result: France borrows today at around 3% (for its ten-year loans at a fixed rate), compared to around 0% in 2021. This rate applies to the new debt it raises, but also to the renewal of the old debts.
Finally, more prosaically, the debt burden increases because…debt increases. In the last ten years, it has increased by 1 trillion, that is, 112% of French GDP. To compensate for its deficit budgets, year after year, the State has had to increase its debt. The interest to be repaid accumulates and increases the debt even more, in a kind of vicious circle.
Diagram from “Coronavirus: where do all these billions in recovery plans come from?” » by Maxime Vaudano and Mathilde Damgé, article published on April 23, 2020.
As the Court of Auditors explained in April, these phenomena can be combined: thus “The strong growth in the volume of state debt since 2008 notably reinforces its sensitivity to rate movements”.
Is there a maximum level that should not be exceeded?
Ahead of the budget discussions, Economy and Finance Minister Antoine Armand expressed concern about the situation, hinting that France’s recourse to debt might one day no longer be possible: “If we can no longer finance ourselves in the markets, we will not be able to continue preparing for the future with nuclear energy and new technologies, and we will depend on others. » But when does debt become unsustainable and there is a risk of default?
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There is no consensus on a threshold beyond which France could not finance itself on the financial markets. The State’s access to debt depends above all on the markets’ confidence in its ability to repay it. Several factors influence this, including the opinions of rating agencies (in particular, Fitch, Standard & Poor’s, Moody’s) on the budgetary situation of the States. The latest to date: the warning sent on October 25 to France by Moody’s, concerned about “deterioration” of public finances has “exceeds[é] [ses] expectations »however, without immediately lowering your rating.
However, the less confidence the financial markets have, the higher the interest rates granted to States will be. In recent months, political uncertainties linked to the dissolution of the National Assembly and budget controversies have contributed to raising the rates at which France borrows, compared to its neighbors. On September 26, the five-year loan rate symbolically slightly exceeded the Greek rate and is also close to the Spanish rate.
Despite these “signals”, France is not at any risk in the short term. When loans mature and new ones need to be taken out, the French State still manages to obtain attractive rates, because lending money remains a safe investment. In each issue, the AFT places its debt without problems, even this summer in the absence of a majority in the Assembly. The euro, a common currency, limits speculative attacks and makes it possible to benefit from the support of the ECB in the event of a market offensive.
Furthermore, France’s situation is not unique: in Western countries, public debt has continued to grow with the decline in growth and the liberalization of financial markets, offering States generous financing possibilities. In absolute value, the UK’s debt has increased sixfold in twenty years. Furthermore, despite their slight recent fall, French rates remain within the European average for the moment, particularly in the long term, and well below the records of the 1980s, for example.
How big is the financial risk?
The risk that the government wields lies rather in the ” cost “ of this debt for public finances: in the future, will we be able to spend “More money to pay our loans than for our schools, our security or our economic fabric? »Antoine Armand asked. The high amount of interest owed by the State encourages governments to reduce allocations for other items of public spending or to increase taxes. Michel Barnier’s sets a target of 60 billion euros of savings by 2025, an amount that is close to the 55 billion that will be absorbed next year by paying interest on the debt.
The right is also part of this line of” effort “ budget, advocating for less taxes and more savings, when the left denounces an austerity plan ” violent “, which could hinder growth and limit state revenues, thus increasing the deficit: “I think this will produce an economic recession and that it is really not the right way to address the problem of the growing public deficit”Manuel Bompard, coordinator of La Francia insumisa, had estimated in October. For part of the ranks of the left, there are alternative solutions, such as the cancellation of public debts, which generates many other types of risks.
