France’s future macrofinancial equilibrium

France is in a different situation to that of the other euro-zone countries: it has a chronic savings shortfall, despite a high level of household savings, due to an investment rate that is also high , and fiscal deficits. Non-residents therefore play an important role in financing the economy. In the future, it is reasonable to expect: The ECB to stop buying government bonds; More equity financing and less debt financing by companies. These developments point towards two macrofinancial scenarios. An equilibrium without intervention by non-residents: domestic savers hold at once less money and more public debt (offsetting the end of quantitative easing) and less corporate debt and more equities (offsetting the change in the way companies raise capital). But, given the level of interest rates, it is unlikely that domestic savers will be willing to hold more public debt. An equilibrium with intervention by non-residents: domestic savers hold at once less money, less corporate debt and not more public debt. They then hold many more equities and equilibrium is achieved by the fact that non-residents hold more public debt and fewer shares in French companies. In this scenario, domestic savers rotate heavily into equities. This second scenario is better for France in terms of well-being: the cost of the external debt decreases (the share of public debt in external debt increases) and ownership of French companies becomes more domestic.