France’s Debt Problems Raise New Eurozone Concerns

(MENAFN) Political uncertainty and mounting financial pressures in France, the eurozone’s second-largest economy, are raising concerns about the possibility of another debt crisis across the currency bloc.

France is facing a period marked by worsening fiscal conditions, political instability and widespread protests, with the challenges unfolding simultaneously.

The country’s deteriorating public finances have driven borrowing costs to their highest levels in recent years, while the euro has weakened against the US dollar. The currency fell to 1.116, its lowest point in roughly a year and a half.

Economists remain uncertain over whether the problems emerging in France could spread rapidly across other eurozone economies and trigger another regional debt crisis.

France’s budget deficit stood at 5.8% of gross domestic product, exceeding the European Union’s 3% limit. The country is targeting a reduction in the deficit to 5% next year, according to national statistics data.

France has failed to record a budget surplus since 1974, while government spending has continued to increase despite limited growth in tax revenues.

Of the €1.3 trillion ($1.5 trillion) increase in public debt since 2017, more than half resulted from spending linked to the COVID-19 pandemic and the energy crisis. The remainder was attributed to tax reductions for households and companies.

As persistent budget deficits continue to weigh on the country’s finances, France’s public debt-to-GDP ratio is projected to climb to 121.7% by 2027.

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