What do the US and France have in common? Both are facing nation-defining elections, and both have public finances that are unsustainable.
Under those rules, deficits are supposed to be held to a maximum of 3 per cent of GDP and the debt-to-GDP ratio is limited to a maximum of 60 per cent. The rules were suspended in 2020 when the pandemic hit and have remained so, until earlier this year, because of Russia’s invasion of Ukraine and the surge in energy prices, defence spending and aid to Ukraine that it ignited.France’s budget deficit last year was 5.5 per cent of GDP and its €2.3 trillion of debt is more than 5.
Under Biden, at least, the splurge of spending has sustained the US economy even as the rest of the world has struggled. Inflation, while still high by historical standards, is cooling, and it is probable that interest rates will start to track down late this year. Le Pen has promised to increase public spending, lower the retirement age and cut the value added tax on fuel, so it is improbable that a RN victory would produce more conservative public finances.
Both Greece and Spain have debt-to-GDP ratios way above the EC’s ceilings, but they weren’t singled out because their budget deficits have been steadily and significantly shrinking.
Source: Loan Digest (loandigest.net)
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