Bringing French Public Debt Down: The Options for Fiscal Consolidation
France has a track record of persistent general government deficits, partly reflecting pro-cyclical fiscal policies in upswings. This has resulted in a quadrupling of its public debt-to-GDP ratio since the 1970s to above 80% of GDP. Reducing public debt is crucial because a high level of public debt may hamper long-term growth and may have a direct impact on fiscal sustainability if long-term interest rates rise. Bringing back public debt to 60% of GDP even by 2030 would require a fiscal effort of 4 to 5 percentage points of GDP (under the assumption of unchanged long-term rates), implying permanent primary general government surpluses, which is very ambitious in view of French fiscal history since 1970. The government’s consolidation programme, which is aimed at reducing the general government deficit to 3% of GDP by 2013, represents around two-thirds of this effort. This study analyses how fiscal governance could be improved by the creation of a structural deficit rule and looks at ways the public deficit could be lowered. With France already having a very large public sector, most of the effort should be borne by holding down spending. Better control of the public wage bill, increasing public-sector efficiency and tackling age-related costs are the obvious candidates to contain expenditure. On the revenue side, there is significant potential for cutting tax expenditures. Furthermore, eliminating distortions in the tax base would encourage economic growth.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Xavier Debrun & David Hauner & Manmohan S. Kumar, 2009. "Independent Fiscal Agencies," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 44-81, 02.
- Reinhart, Carmen M. & Rogoff, Kenneth S., 2010.
"Growth in a Time of Debt,"
11129154, Harvard University Department of Economics.
- Lars Jonung & Martin Larch, 2006.
"Improving fiscal policy in the EU: the case for independent forecasts,"
CEPR;CES;MSH, vol. 21(47), pages 491-534, 07.
- Lars Jonung & Martin Larch, 2004. "Improving fiscal policy in the EU: the case for independent forecasts," European Economy - Economic Papers 210, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
- Isabelle Joumard & Christophe André & Chantal Nicq, 2010. "Health Care Systems: Efficiency and Institutions," OECD Economics Department Working Papers 769, OECD Publishing.
- Isabelle Joumard & Christophe André, 2008. "Revenue Buoyancy and its Fiscal Policy Implications," OECD Economics Department Working Papers 598, OECD Publishing.
- Isabell Koske, 2010. "After the Crisis - Bringing German Public Finances Back to a Sustainable Path," OECD Economics Department Working Papers 766, OECD Publishing.
- Balázs Égert, 2012.
"Fiscal Policy Reaction to the Cycle in the OECD: Pro- or Counter-cyclical?,"
EconomiX Working Papers
2012-12, University of Paris West - Nanterre la Défense, EconomiX.
- Balázs Égert, 2010. "Fiscal Policy Reaction to the Cycle in the OECD: Pro- or Counter-cyclical?," OECD Economics Department Working Papers 763, OECD Publishing.
- Balazs Egert, 2012. "Fiscal Policy Reaction to the Cycle in the OECD: Pro- or Counter-Cyclical?," CESifo Working Paper Series 3777, CESifo Group Munich.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3928. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.