Debt, growth and revival The French public debt will exceed 86% of GDP at end 2010
according to government estimates. Is this serious?
Note first that a debt (ie money owed by a State) poses no difficulty if it is greater than the assets (ie money that can be obtained by the same state). That question is less than the debt level as the level of "net assets public" (value of public property - public debt). And unfortunately this review is negative
Source: Court of Auditors
can recess to discuss the methodology used (certain assets such as the Arc de Triomphe are probably not recorded at market value, ie the value that could be obtained by selling at auction). It could also Note that this table does not record the assets "intangible" (ie, for example, the market value of scientific knowledge of the country).
True, but one thing is sure: in evolution, the strong growth of public debt of recent years had no counterpart in terms of acceleration of the creation of assets, tangible or intangible.
If we take the estimate of the Court of Auditors, assuming that the value of assets increased only for inflation from 2008 to 2009, the record of France has been degraded by over 100 billion in 2009
With an average interest rate of 4%, these 123 billion is a sterile puncture envrion 5 billion euros per year. And therein lies the first problem of economic debt: this "sterile puncture" will weigh on activity as part of the effort of the nation will not give back to those who realize it but will be punctured.
Note however that the debt is not the only element able to produce "sterile punctures": after World War II, the drain on Germany (and
denounced at the time Keynes ) under compensation for war damage had a similar effect. Similarly, a mismanaged state will conduct a puncture equal to the amount of its waste.
should also be noted that it was probably here that the main "sterile puncture" in most developed countries as shown by a simple calculation of orders of magnitude for France
- have 30% of GDP active for 80% of debt carries a "sterile puncture" of (80-30) x 4% = 2% of GDP
- war damages paid by Germany represented a drain of about 3% GDP at the time
- have 50% of GDP in public spending and 10% of inefficiency produces a "sterile aspiration" of 50% x 10% = 5% of GDP
The 10% inefficiency is not random: for example, programs cost reduction in purchasing the public can get gains of around 20%. This rate does not mean that some officials do nothing, but rather that other factors will create unfavorable conditions to the effectiveness of their action
- organizational problems (stack structure, lack of rigor in clarifying roles and responsibilities ,...)
- problems consistency over time and space guidelines set for their action
- deficit assessment and costing prior election programs, laws and regulations
- variable political support given to their effectiveness in comparison to ' Other considerations
A final negative effect of debt is indirect: high debt will induce a high risk of "deleveraging", ie to reduce spending or investments to enable debt reduction. Now all phases of debt increase faster growth (people, companies or states consume more than they earn), all phases of debt reduction will slow growth. Make savings to reduce debt is a good thing, but do so without precautions will weigh on growth: virtue is poorly rewarded in the short term!
In this regard, the McKinsey Global Institute
has published an interesting study that quantifies these effects by major actors (households, companies, states) and country.
