France’s borrowing has a reached a “danger level”, Finance Minister Bruno Le Maire said on Monday amid calls for more public spending to help low-income households cope with galloping inflation.
Until recently, many Western states could borrow at no cost as investors lent them money freely, but the return of inflation and the war in Ukraine have spiked rates.
“Not everything is possible, simply because we have reached the danger level for our public finances,” Le Maire said, explaining that changed market conditions meant that France was now paying interest of “more than two percent” on newly issued debt.
“Additional spending of 20-25 billion euros ($21-26 billion) on fuel as some political parties are proposing is too costly, or otherwise we will have to cut other things,” Le Maire told BFM television.
Several opposition parties including the far-right National Rally and the right-wing Republicans party are pushing for a cut to fuel taxes as part of a new package of measures intended to ease the cost-of-living crisis in France.
The government of centrist President Emmanuel Macron is expected to propose a package in the coming weeks, but it will have to rely on the support of opposition parties, having lost its majority in elections earlier this month.
After huge bailouts in the wake of the global financial crisis in 2008 and the Covid-19 pandemic from 2020, France’s public debt has soared to the equivalent of 114.5 percent of GDP, or 2.9 trillion euros, according to national statistics.
“Politics is about choices… it’s imperative that we reduce the public debt,” Le Maire said.
“We need to protect our most vulnerable fellow citizens at the same time, but protect them in a responsible fashion,” he added.
In recent weeks, the interest rates paid by heavily indebted countries in the eurozone have jumped sharply higher compared with low-debt Germany, reviving memories of the 2011-2012 European debt crisis.
French annual inflation hit 5.9 percent in June, official statistics showed.
This is lower than in many developed countries thanks to government efforts to help households, including capping power prices and duty cuts on petrol and diesel, to the tune of 26 billion euros since the end of 2021.