The debt load will be reduced by 2 billion euros in 2019 compared to the forecasts of the Finance Law thanks to the fall in interest rates. The government has yet to find 1.5 billion savings in 2019.

Low rates will not upset the government's fiscal strategy.

It is not 400 million euros, as the Court of Auditors predicted in June, but 2 billion that the State will save this year on the debt load thanks to the fall in interest rates. Gérald Darmanin, the Minister of Action and Public Accounts, announced it on Tuesday evening on France 2. To be precise, the 2 billion euros correspond to the difference between the assumptions of the 2019 Finance bill and the situation observed at the beginning of the summer.

The interest rates at which the French government borrows on the markets indeed turned negative at the end of June. On Wednesday, the 10-year rate stood at around -0.4% while, in the 2019 budget proposal, presented last fall, the government forecast 2.15%. Since the beginning of the year, new debt issues have been made at 0.23% on average, according to Agence France Trésor, half less than last year.

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The trade war between the United States and China, the possibility of a no-deal Brexit, the slowdown in Chinese activity and the near-recession in Germany have lowered global growth, inflation and therefore interest rates, particularly in the euro zone. The European Central Bank should also embark on a more accommodating monetary policy next month. The markets have already largely anticipated it.

Unexpected luck

Suffice to say that, for the government, the drop in rates is an unexpected opportunity. But, Gérald Darmanin was quick to point out on Twitter that this windfall will have no effect on the government’s budgetary policy. “It is imperative to continue our serious budget”, said the minister. Public debt is expected to approach 100% of GDP at the end of the year. “It is not because the rates are low that we are going to relax the effort on public spending”, we assure Bercy.

No question of launching any public investment plan because the rates are negative. “We will not borrow more, because any loan must at some point be repaid”, explained Gérald Darmanin. The recommendations of the former chief economist of the IMF, Olivier Blanchard, – who advises to take advantage of low rates to invest – will not be followed.

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In a report last July, Joël Giraud, the general budget rapporteur, estimated that « lkeep interest rates low […] allows for effortless budgetary leeway. However, it has the drawback of causing anesthetic side effects which should not distract us from the process of improving the efficiency of public policies ”.

There is still 1.5 billion euros in savings to be found to reach the target of a public deficit of 3.1% of GDP this year. The government promises to document these savings in an amending finance law to be presented at the end of the year. In the meantime, the meetings are multiplying in Bercy to try to release this substantial sum.