Sick man in Europe?: France threatens to fall in the government – concern for debts is growing

Sick man in Europe?: France threatens to fall in the government – concern for debts is growing

Sick man in Europe?
France threatens government fall – concern for debts is growing






Premier Bayrou warns of the consequences of growing debts and poses the question of trust. Why experts still do not expect a state debt crisis.

The threat of government fall in the highly indebted France at the beginning of next week and the feared continuation of the political crisis has aroused concern about economic instability in the important EU country. In view of the high debt burden and the dispute over his savings budget with planned savings of 43.8 billion euros, France’s Premier François Bayrou had surprisingly announced the question of trust in parliament at the end of August. Everything indicates that he loses the vote on Monday afternoon.



The question is whether France threatens to exhaust the debt problem with negative economic consequences. The Prime Minister had warned against such a development if France did not rely on the rudder across party borders during the debt and gave a savings budget on the way. There is currently no majority for this in parliament.

Highest debt mountain in Europe


The already high public debt in France has recently risen to around 114 percent of gross domestic product. France is thus the country in the euro area with the highest debt rate to Greece and Italy. In absolute numbers, France has the highest debt mountain in the euro area with around 3,300 billion euros. State issues in France are currently among the highest in Europe.

Despite the political uncertainty, experts do not expect a state debt crisis. “Every impending fall of the government in a country of the euro zone is worrying,” said the President of the European Central Bank (ECB), Christine Lagarde, in the interview of the broadcaster Radio Classique a few days ago. However, the French banking system is better positioned than during the last financial crisis and it does not expect France to inquire about the renovation of its finances from the International Monetary Fund (IMF).




New bonds for Paris more and more expensive


The fact is, however, that France, in view of the political hanging game and previously lacking savings efforts for new government bonds, now pays higher interest rates for government bonds than Greece and almost as much as Italy. “Investors are concerned about the high and further increasing public debt in France. The bond returns have already risen significantly more in France than, for example, in Italy, and now the return of ten-year-old French government bonds is hardly under the Italian,” commented Commerzbank chief host Jörg Krämer.

Due to the lack of a majority of reforms in parliament, Kramer considers that the fact that France will succeed under a new prime minister to continue to reduce 5.8 percent in the coming year, as of Finance Minister Eric Lombard, to reduce 4.6 percent of gross domestic product.





Structural reforms required

According to a recently published assessment by the US investment bank Goldman Sachs, the greatest economic challenge for France will be to stabilize government debt. In addition, the country must resume structural reforms in order to boost growth. France had to produce more, Premier Bayrou had asked – with his plan to delete two holidays, but had applied a majority of people against his savings plans.

dpa

Source: Stern

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