03 Jul 2024 2 min read

Are French public finances manageable?

By Christopher Jeffery

The French election has captured the attention of global financial markets. The drama of an election campaign is always fascinating, especially when the political parties involved are polarised on major issues. But are the country’s key challenges political, or economic?


The political spectrum in France is wide, with the Rassemblement National (on the right) and the Nouveau Front Populaire (on the left) having very different diagnoses of what ails the country and how to fix it. Our chart of the month for July offers a perspective on the French predicament from a recently released report from the European Commission on the state of public finances across the European Union.

In the chart above, each dot represents one of the 27 countries in the European Union. On one axis, we show the Commission’s forecast for debt/GDP in 2025. On the other axis, we show their forecast for the government balance/GDP in 2025. The first is a measure of the stock of government spending in excess of revenue. The second is a measure of the flow of government spending in excess of revenue. The median across the EU is very respectable: debt/GDP at just below 60%, the government balance at just below -3%. If the EU were a single entity, it would have little problem passing the Maastricht criteria laid down in 1992. But France has a clear issue. Only two countries have higher debt (Italy and Greece), only two countries have higher deficits (Romania and Slovakia). No other country has higher debt and higher deficits.

The recent sell-off in French government debt has clearly been catalysed by political developments with the unexpected announcement of a parliamentary election. But as my chemistry teacher taught me nearly 30 years ago (thank you, Mr Browning), a catalyst is an accelerant rather than the cause of a chemical reaction. France’s underlying predicament, as captured in the chart, is economic rather than political.

Christopher Jeffery

Head of Macro, Asset Allocation

Chris is Head of Macro within LGIM’s Asset Allocation team. He oversees LGIM’s Economic Research, Rates and Inflation, and the Multi-Asset Strategists and idea generators. He joined LGIM in 2014 from BNP Paribas Investment Partners where he worked as a senior economist and strategist within the Multi-Asset Solutions group. Prior to that, he worked as an economist within monetary analysis at the Bank of England with a focus on the UK domestic economy. Chris graduated from University College, Oxford in 2001 with a first class degree in philosophy, politics and economics. He also holds an Msc in economics (research) from the London School of Economics and is a CFA charterholder.

Christopher Jeffery