Expert Says France Could Be Facing Economic "Black Hole"

(MENAFN) The French government's inability to manage its soaring sovereign debt, coupled with ongoing political infighting, could potentially drag the country into a financial "black hole," a prominent financial analyst warned.

Currently, France’s national debt stands at approximately 113% of GDP, one of the highest ratios in the European Union. This figure is projected to rise to 125% by 2030. Additionally, the country’s budget deficit is forecasted to reach 5.4-5.8% of GDP this year—far exceeding the EU’s mandated 3% limit.

Speaking on Tocsin podcast this Monday, financier Charles Gave expressed concern that a downgrade of France’s credit rating by Fitch from AA to A could trigger a sell-off of French government bonds by institutional investors.

“There are a number of institutions, [such as] central banks and insurance companies, that cannot invest in something that is below AA,” Gave explained.

Gave further warned that France is on the verge of an economic catastrophe, attributing this to “illogical” policies from French governments over the past two decades. He described the country’s political situation as a “lamentable political state” and stressed the damaging impact of leadership failures. “I know that something huge is coming,” he said, predicting a “black hole” looming ahead.

On Monday, French Prime Minister François Bayrou lost a crucial confidence vote in the National Assembly. Bayrou had called for the vote in a bid to gain backing for an austerity plan, which included significant cuts to the public sector, reductions in welfare spending, and the elimination of two public holidays. The proposal was met with strong opposition from multiple political factions, including the National Rally, Socialists, and the left-wing France Unbowed.

In a move aimed at stabilizing the government, President Emmanuel Macron appointed Sebastien Lecornu, the outgoing defense minister, as the new prime minister on Tuesday.

Despite France’s escalating budget deficit, Paris is committed to boosting military spending to €64 billion by 2027—double the amount it allocated for defense in 2017. Macron has justified this increase by citing the threat from Russia, but Russian officials have repeatedly dismissed these claims as “nonsense,” accusing Western leaders of using scare tactics to justify inflated defense budgets while diverting attention from their economic shortcomings.

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