TRIBUNE. Why debt is a problem


In France, the most expensive country in the world, the most taxed country in the world, the country which borrows the most (1 billion per day in 2020!), We always hear the same old tune. When we are “growing”? You have to spend more and get into debt for more… growth. When are we in a recession? We must spend more and get into debt to offset the effects of the recession. Now is never the time to better manage our public finances. The appalled Economists vigorously defended this point of view in the columns of the “Obs” a few days ago and they are not the only ones. What if the deficit is too high? They are simply proposing to raise taxes further.

Louis Gallois: “We must fight against the illusions of degrowth”

Those who say that too much austerity was imposed on France after the previous crisis of 2008 – and it’s not just Les economistes Atterrés among them, far from it – knowingly forget that it was in France, at that time that we increased taxes the most. Increase in the CSG on capital income, scaling of income tax on capital income, massive planing of tax loopholes … From 2010 to 2013, France’s compulsory levy rate fell from 41 to 45 %… During this time, the expenses did not decrease, on the contrary they went from 56% of the GDP to 56.5%. There has been no better management of our public finances, there has just been a French-style “austerity” called an all-out tax hike.

1 – Canceling the debt is not possible

Cancel Covid Debt? It sounds so simple! Except that it is prohibited by the European treaties: according to articles 123 and 124 of the TFEU, the financing of the public debt of the States of the euro zone must be carried out with private financial institutions, either by mutual agreement, or on the markets. To be free from it would imply modifying the treaties, which would imply an agreement by the European Council of Heads of State and Government. Nothing is less sure. Going down this road would mean a breach of France’s commitments to its European partners, which could only weaken our country.

In addition, the operation would be useless since the buyback of the public debt by the ECB “neutralizes” the cost of this same debt for the State: the interest charges being offset by dividends and corporate tax paid by the Central Bank. its own Central Bank.

Finally, any cancellation would end in the end of the autonomy of the Central Bank. It would then be integrated into public administrations and the canceled debt would be recreated at the level of the Central Bank vis-à-vis the commercial banks and added to the public debt. And the circle would be closed: to finance it, the State would have to… increase the taxes of the French.

2 – Taxing more is not possible

France is at more than 46% of compulsory tax rate compared to GDP… We are taxed as much as possible on labor, on capital, on companies, on inheritances, on the tax block everywhere. Every time we raise taxes a little more, we will weaken our French production. And this even when we want to reindustrialize? That does not make sense. As for those who propose to make a raid on the savings of the French, in particular on our 1,800 billion life insurance by taxing it heavily or by blocking it, it would be at their own risk. This would risk generating even more savings but placed this time … outside France, which would accelerate the downgrading of France.

3 – Spending more is not possible

The “whatever the cost” cannot go on forever and has to stop by the end of the year, it’s vital. The Minister of Public Accounts himself recognizes this. An economy almost at a standstill, which depends on short-time working, which prevents its restaurateurs from opening, which closes its museums, its theaters … is losing its national wealth. It is irremediably more unemployment and poverty. Not to mention the despair of youth. More spending, more debt, less work? It is to embark France in the decline and downgrading.

Is this what we want? Certainly not. France has already stopped its activity more in 2020 than in Germany. We have a recession that is twice as high as our partner in the Overseas Territories in 2020. A 2021 deficit already forecast to exceed 160 billion euros. Saying that we can go even further is not a credible option.

“The best forecaster in the world” is clear: “The economy will take years to erase the 2020 hole”

4 – The ECB cannot buy back all of our debt every year

We will need to borrow 260 billion euros in 2021. And much the same thing in 2022 and so on. Who can believe that, every year, the ECB will buy back all of France’s debts? It does not mean anything ! It would be a lie to make the French believe that. Indeed, the Central Bank’s balance sheet cannot grow ad infinitum, which would make any prospect of “normalization” of fiscal policy more remote and would end up undermining confidence in the currency, especially as currencies are in decline. competition internationally.

What has to be done :

First of all, to limit and amortize the “Covid” debt. At the same time, move up a gear in terms of structural reforms: reform of pensions, unemployment insurance, social minima (single social allowance), modify the public perimeter, decentralize. And above all, above all, to get France back to work as quickly as possible.

To rebuild our country after this crisis? It will take hard work, the opposite is an illusion. Our European partners have not turned their backs on reconstruction and massive investments for an overhauled economic and institutional framework, but unlike France, they have agreed to carry out the necessary reforms which have enabled them to get through the crisis. with healthy public finances, which will allow them to rebound better. To ask for the cancellation of the debt without committing to a transformation of our model is to recognize that we are not able to adapt, it is an admission of failure.

We must act quickly … because sooner or later monetary policy will return to more normal, which clearly means that the ECB will stop its repurchases and that the rates will increase, if we have not started the reforms before, we will not be ready and that will no longer become fundable for France. It’s urgent. The government must now build its reconstruction strategy for France with a clear 2022-2030 timetable and share it with the French. Without waiting for 2022.



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