French debt climbs

September 30, 2009

, PARIS, Sept 30 – France\’s public debt rose to 73.9 percent of GDP in the second quarter of 2009, far above the target laid down by European Union rules, the state statistics agency said on Wednesday.

The figure — the accumulated excess of state, welfare and local government spending over revenues — was up 3.9 percent from the level in March.

It now totals 1,428 billion euros (2,090 billion dollars), according to the INSEE agency.

Under the Maastrict treaty, eurozone members are supposed to keep public debt under 60 percent of their gross domestic product, but France and others have seen their levels increase under the pressure of stimulus spending.

President Nicolas Sarkozy\’s government was due to release its national budget later on Wednesday and was expected to confirm a cut in business taxes that would increase local government debt levels still further.

France, in common with most European countries, has dramatically increased public spending in order to bounce the economy out of the recession caused by last year\’s global financial collapse, and public debt is forecast to rise to 77 percent this year.

The state budget deficit hit 71.9 billion euros at the end of April, up from 45 billion euros at the same time last year, and last week the government warned that the 2009 public deficit could reach 7.5 percent of output.

Under the EU stability pact rules for the eurozone, member states are supposed to keep their annual public deficits to less than three percent of GDP, but many governments states are running far in excess of that and risking European sanctions.

A national deficit and the debt feed each other if the deficit, or annual overspending, is rising.

The deficit each year is added to the historic stock of debt, and the extra interest on the increased debt raises annual budget spending in the following year.

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