Edito - April 2022
Temps de lecture : min
Moment of truth
It is striking to see how the latest figures on the debt-to-GDP ratio in France have been commented on. Indeed, some have welcomed the fact that it finally amounts to only 112.9%, thanks to a growth in Gross Domestic Product (GDP) - the denominator of the ratio - driven itself by inflation and … debt. A distressing finding that is not a surprise since we compare a stock to a flow! Public spending now accounts for nearly 59.2% of GDP (compared to 55.6% in 2019) as a result of emergency and recovery plans. And the cost of servicing this debt is expected to increase even further as rates begin to rise.
Rates will continue to rise as inflationary pressures diffuse. If all the industrial players are not directly affected by the paralysis of the Ukrainian and Russian markets, the difficulties are shared by all. Soaring energy prices, tensions over mineral and agricultural raw materials and shortages of electronic components amid Chinese lockdowns are affecting all economic sectors, wherever they may be. And the logistical problems faced by international transits are just a taste of what would happen with the paralysis of the Taiwan Strait… At the same time, the loss of household purchasing power should increase demands for a more employee-friendly sharing of value added. A trend already at work before the pandemic and described in our Economic and Financial Outlook.
However, financial markets do not reflect this debt impasse and the stock market indices are not far from their highest levels. However, the correction of deviations from the major macroeconomic and financial balances will have to take place. In the euro area, it will test the Community institutions
« European solidarity could once again be tested against the backdrop of the return of politics at the level of member countries, of the quest for mastery of national strategic sectors, and challenging the European Union’s community of destiny in the context of common debt management. »
In this moment of truth, the time of choice will ring beyond the eurozone. The Ukrainian conflict has shown that it is difficult to maintain a non-aligned position and the pressure is great on each country to position itself in the US vs China duel. Also, on the path of ecological transition, choose between the protection of our environmental capital and the necessary accompaniment of the populations. Finally, in the movement to reorganize supply chains and industrial and energy sovereignty between the security of Western consumer citizens and the risk of undermining the virtuous circle between emerging and more advanced countries of the old pattern of globalization. Not choosing is not an option for our rulers; they will have to endure their decision.
Deputy Director-General in charge of all Management, Marketing, Negotiation and Research
April 11, 2022
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