Portugal’s good performance in terms of debt reduction and budget surplus puts the country at an advantage over France, which is experiencing greater turbulence in its public accounts.
The improvement in Portugal’s budgetary indicators in recent years coincided with the deterioration in France’s indicators. Portugal has a debt to GDP ratio below 100% at the end of 2023 and reached a budget surplus of 1.2%. France reached a deficit of 5.5% and recorded a debt-to-GDP ratio of 110% at the end of last year.
In this way, the acronym PIGS (Portugal, Ireland, Greece and Spain) forged during the eurozone crisis in 2010 (considered pejorative by many, as it is the word for ‘pigs’ in English), could lose Portugal’s P and gain the F in France to become FIGS, as suggested by the Spanish newspaper “El Economista”.
The deficit is only expected to fall below 4% in 2029, according to the IMF’s most recent forecast.
The French risk premium (differential between the cost of French debt and German 10-year debt) is currently at 51, above the average of 38.6 points over the last decade. In contrast, the Portuguese risk premium stands at 66 points, below the 151 average.
“France has become Europe’s budgetary focus”, according to economists at Bank of America Merrill Lynch (BofAML). “Budget holders in Italy and France are raising questions about the sustainability of public finances.”
Capital Economics analysts point out that France’s “excess deficit is almost exclusively” due to the lack of tax revenue.
“The upward trend in current primary expenditure over the last three decades has left France with the highest expenditure ratio in Europe. France will need to reverse this trend through structural spending reforms to rebuild budgetary reserves, which have suffered erosion caused by the response to successive shocks during 2020-2022”, according to the IMF.
French MEP Geoffroy Didier, from the Republican Party, has been a fierce critic of Emmanuel Macron’s economic policy: “Seeing the intense deviation between the public deficit predicted in 2023 and the real one, it would not be surprising if the same thing happens again in 2024 and 2025.”
At the end of March, the European Commission even questioned: “given the disconnect between the announced deficits and those now expected: is it planned to initiate an infringement procedure against France for excessive deficit in the near future?”, according to “El Economista” .
The politician fears that Moody’s, Fitch or Standard & Poor’s will cut the French rating on April 26 or May 31, which “will only further harm the credibility of Emmanuel Macron and his Government, as well as their ability to govern France.”
