Agnès Verdier-Molinié: In order not to end up suffocated by debt, a budgetary golden rule will eventually become unavoidable

Agnès Verdier-Molinié, director of the iFrap think tank, has called for the adoption of a constitutional "golden rule" for public finances to prevent France from being suffocated by debt. In a recent statement, she emphasized that such a rule would ensure fiscal balance and restore investor confidence, arguing that this measure is essential to preserving France’s social model. Verdier-Molinié outlined concerns over the growing burden of public debt, noting that France's annual debt service costs are approaching 80 billion euros and could surpass 140 billion euros by 2032. She cited projections from the OECD suggesting that without intervention, French public debt could reach 203 percent of GDP by 2050. Currently, France’s public debt stands at 118 percent of GDP, significantly higher than its European neighbors such as Germany (62 percent), Switzerland (41.4 percent), and Sweden (33.6 percent). These differences, according to Verdier-Molinié, stem from policy choices made by these countries rather than geographic or cultural factors. She pointed to the decisions made by neighboring nations since the 1990s and during the financial crisis to implement golden rules for their public finances. These rules aim to prevent deficit spending and accumulating debt except during severe crises. In contrast, France has not adopted similar constraints, leading to a situation where debt continues to grow unchecked. Verdier-Molinié warned that with economic growth lagging behind the apparent interest rate on debt, currently at 2.2 percent, the debt burden becomes self-sustaining and increases automatically. The think tank, which is set to publish a detailed analysis on the subject, argues that embedding a golden rule into the constitution would provide a legal framework to enforce fiscal discipline. This approach, she explained, would help avoid the so-called “snowball effect” of debt, where increasing debt levels lead to higher borrowing costs and further economic strain. The current trajectory, she said, risks undermining long-term economic stability and eroding trust in public institutions. Verdier-Molinié highlighted the importance of learning from other countries' experiences. Nations like Germany have maintained lower debt levels through strict fiscal policies, ensuring that deficits are avoided unless absolutely necessary. By contrast, France has faced repeated budgetary challenges, including periods of high deficit and increased borrowing, particularly after major economic shocks such as the global financial crisis and more recently, the pandemic. Her remarks come amid ongoing debates within France about how best to manage public finances and address the rising debt burden. While some policymakers advocate for structural reforms and austerity measures, others emphasize the need for investment in growth and job creation. Verdier-Molinié’s proposal adds another dimension to the discussion, emphasizing the necessity of constitutional safeguards to ensure fiscal responsibility. The iFrap think tank plans to release a comprehensive report detailing the potential impacts of implementing a golden rule in France. The document will explore historical examples, compare international practices, and assess the feasibility of integrating such a rule into the country’s legal framework. It is expected to spark further debate among economists, politicians, and public officials regarding the best path forward for managing national debt. French authorities have yet to respond formally to the proposal, though discussions around fiscal reform remain active in political circles. With public debt continuing to rise and economic pressures mounting, the call for a constitutional golden rule represents one possible solution to a complex and pressing challenge.