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The future of Covid debt, a political as well as an economic debate

Analysis. It was a little over a year ago, it seems like a century. In December 2019, INSEE revealed that French debt had crossed 100% of gross domestic product (GDP) in the third quarter of the year. Enough to trigger a slew of vehement comments, some to reassure – “it is only provisional, the fateful threshold will not be exceeded throughout the year” -, others to warn about the risk of harming a little more the promises of recovery of public accounts made by Emmanuel Macron at the start of his mandate.

A year and a global pandemic later, those worries could almost bring a smile if the matter weren’t so serious. The crisis due to Covid-19 has plunged the French economy into recession, the state has trickled down billions to support businesses and employees, and the country’s budgetary trajectory has been upset. Once an insurmountable taboo, the threshold of 100% of public debt is only a distant memory: it should reach 121.4% in 2021 …

In this “world after”, the executive is still looking for a course of action. At the end of the year, the prospect of the arrival of a vaccine led the Minister of the Economy, Bruno Le Maire, to lay the groundwork for an exit from “whatever the cost”, this principle. decreed in March 2020 by the Head of State, as a bulwark against the economic and social crisis.

In December, a commission on the future of public finances, made up of politicians, researchers and chaired by former Minister of the Economy Jean Arthuis, was mandated to reflect on how to manage the “Covid debt”, the approximately 150 billion euros bill for the health crisis.

For the ex-LR Bruno Le Maire, it was not only the serious budget of the country, which cannot afford to live on credit for long, but also the credibility of France vis-à-vis its European partners and that government eighteen months from the presidential election.

“As long as the crisis lasts, we will be there”

Alas, the sluggish start of the vaccination campaign in addition to the emergence of variants that relaunch the epidemic and re-containments in several European countries prevent turning the page. Growth will remain sluggish at least until the summer, and support measures for the affected sectors (restaurants, bars, events, etc.) are not about to be lifted. Consequence: France’s debt could well continue to swell until 2022. “As long as the crisis lasts, we will be there”, assured the tenant of Bercy on Wednesday January 27 in front of the senators.

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