Report
Patrick Artus

Could France have a markedly higher fiscal deficit?

In France, public opinion is demanding tax cuts and increased public spending (healthcare, pensions, increased government intervention throughout the country, etc. ). Beyond the European rules and "moral" considerations, is it possible to increase the fiscal deficit markedly in France in the current situation? Overall, France has a small savings shortfall; an increase in the fiscal deficit would therefore, at equilibrium, have to be financed by non-residents; The ECB would not finance an increase in the French fiscal deficit; Could non-residents accept lending more to France? That is dubious given that on the whole, non-residents are sellers of French and euro-zone bonds; So it is very possible that a sharp increase in France’s fiscal deficit would lead to - as can be seen in Italy - a sharp rise in long-term interest rates, especially if the fiscal deficit is not combined with a policy that would boost long-term growth .
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Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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