France is on the verge of a serious crisis of over-indebtedness. Interests paid on the public debt is about to become the largest spending category for the state. Public debt is now close to 100% of GDP, putting in jeopardy the stability of the euro area.
The classic solutions to lower public debt – such as strong growth, hyperinflation, or persistent austerity – seem to be insufficient or impracticable today. Some advocate to spend more, others to cut spending, we want a preventive and orderly restructuring of the French public debt.
The aim of our report is to remove this taboo from the public debate. Its authors adopt a diametrically opposite point of view than the far-left argument based on an alleged illegitimacy of the creditor. Let’s remember the debt was created by a ventripotent state living beyond its means for more than thirty years and struggling today as a result of it.
The authors openly address an issue that is only discussed behind closed doors: the possibility for a large and developed country to restructure its debt.
Such a proposal would only make sense, and could only be accecpted by financial markets, if accompanied by major structural reforms.
Such a debt restructuring is the best way to meet our European commitments without relying on hyperinflation or a euro exit.
The idea of a joint effort to restructure public debt at a European level, through the creation of a pan-European sinking fund, needs to be discussed.