Report
Patrick Artus

France-Germany: What explains the incredible divergence between the trajectories of public debt ratios since the subprime crisis?

From the subprime crisis and until the COVID crisis, Germany's public debt ratio fell sharply while that of France continued to rise. How can this divergence be explained ? Not by an offsetting fall in private debt, since the private sector debt ratio has also risen sharply in France since the subprime crisis; Why then has fiscal policy been able to become much more restrictive in Germany than in France? A distinction must be made between cyclical and structural issues; From a cyclical viewpoint, Germany return ed to full employment much faster than France did , thanks to the vigorous exports and therefore wages; From a structural viewpoint, in terms of public spending, there is a divergence between France and Germany, especially with regard to pensions and public sector wages.
Provider
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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