March 18, 2012
Those who have been following the problems of the euro zone indebtedness have no doubt heard about the problems of debt crises in Greece, Ireland, Italy, Portugal, and Spain. But apparently France has also had a debt crisis. At least that is what the Post told readers.
An article that told readers that Europe is already so highly taxed that it can only look to cut spending referred to:
“the colossal French government debt that helped push Europe into a dangerous yearlong financial crisis from which it only now is emerging.”
The French government debt is actually not especially large, at around 80 percent of GDP. Furthermore, it was the economic crisis that pushed up French debt from a much more modest 60 percent of GDP. While France did see some increase in interest rates on its debt relative to Germany’s, interest rates never approached the levels seen in the crisis countries.
Much of the problem with French debt stems from the failure of the European Central Bank (ECB) to act as a lender of last resort, which would ensure that interest rates remain low. Also the failure of the ECB to act more aggressively to boost the euro zone economy has slowed growth and raised unemployment in France and across the euro zone. This has also worsened the budget deficit. A serious piece discussing Europe’s fiscal situation would have noted these facts.
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