Is France’s public debt sustainable?

To assess public debt sustainability, one must first ask whether the long-term interest rate may in the future become higher than nominal long-term growth or will remain lower than growth. In the first case, the public debt is sustainable if the primary fiscal surplus is greater than the product of the public debt ratio and the interest rate-growth differential . In the second case, even a very small primary fiscal surplus is enough for the public debt to be sustainable . Currently, the second scenario seems more likely, given the expansionary bias of monetary policy and central banks’ determination to facilitate the rise in the employment rate and the very fiscal solvency of governments. Next, the question is whether France could return to a primary fiscal surplus once the unemployment caused by the COVID crisis has disappeared. Given the level of the structural fiscal deficit (3% of GDP), this seems unlikely, which raises concern about France’s debt sustainability.