For some twenty years, Michel Tardieu (H.66) has been hosting the H Hour conferences, a flagship series for the alumni community devoted to major economic, political and societal issues. On January 27, he opened the discussion with François Ecalle by recalling the scale of the day’s topic: “The figures for our public finances are still just as staggering,” before giving the floor to his guest. A former senior civil servant who has worked at the Ministry of Finance and the Court of Auditors, and a former member of the High Council of Public Finances, he now chairs Fipeco (Public and Economic Finances). Addressing the audience, he came to provide a precise assessment of French public finances — and above all to present the possible outlooks, at a time when budgetary mechanics are once again, more than ever, a major political issue.

A Budgetary Trajectory in Stair Steps

This H Hour was devoted to public finances, a topic that imposes itself through its constant presence in economic and political debate. And while the packed room, as usual, was expecting interpretative keys, it above all received a long-term perspective: “We know how to manage crises, but we do not know how to manage cycles,” François Ecalle summarised, returning to a recurring observation: France lets its deficit widen when activity slows, which is normal, but struggles to return to its previous level once growth resumes.

In 2024, the deficit of public administrations stood at just over €160 billion, or 5.8% of GDP. The figure is striking, but the speaker insists: reasoning as a percentage of GDP is the only way to compare deficits over time and across countries. On this point, France ranks among the most deficit-heavy countries in the European Union, and the diagnosis is inseparable from another indicator: debt. It stands at €2.3 trillion, or 113% of GDP. “Debt is the accumulation of deficits,” he reminds us, describing a “stair-step” curve: each crisis adds a new step, and periods of improvement mostly serve to stabilise, rarely to reduce.

Public Spending: Pensions and Healthcare at the Heart of the Equation

He then focused on the dynamics of public spending. Over several decades, it has increased faster than economic activity, while revenues, under unchanged legislation, have broadly grown in line with GDP. Within this imbalance, two items dominate: pensions and healthcare. Social benefits account for most of the increase, while the public-sector wage bill remains relatively stable and public investment tends, rather, to decline. In other words, France spends a lot, and increasingly on structural items that are difficult to curb quickly, while investing less than it did in the past.

International comparison reinforces the sense of vertigo: France is among the leading countries in terms of the public spending-to-GDP ratio (around 57 points), well above the European average. The same logic applies to compulsory levies: despite recent tax cuts, the country remains among the most heavily taxed. This configuration fuels, in the room, an almost existential question: if the country already ranks at the top in terms of resources, why does the impression of collective exhaustion persist?

“We are very often on the podium in terms of spending, but very rarely in terms of results,” recalls Didier Migaud (quoted during the discussion). The audience mentions education, rankings, healthcare and inequalities, and the speaker agrees: the issue of public spending performance is vast — and above all transversal. There is not a single sector where everything goes wrong: inefficiencies appear almost everywhere, and reforms, when they eventually arrive, sometimes take decades.

Stabilising the Debt: Political Urgency and the European Dilemma

Debt, meanwhile, raises another question: how far can it rise before markets become concerned? François Ecalle mentions scenarios in which debt could reach 135% of GDP in the early 2030s, under “reasonable” assumptions for growth and interest rates. This is not the certainty of an immediate crisis, but entry into a zone where the country must convince, no longer through rhetoric, but through credible trajectories. The thermometer of this confidence can be summed up in one word: the spread, the interest-rate gap with Germany. For now, he notes, markets remain relatively calm compared with 2011–2012. One major difference, however: the stabilising role of the European Central Bank, whose intervention — or even the mere promise of intervention — may be enough to contain tensions.

But Mr Ecalle warns: “This is a moment when we are going to place our destiny in the hands of the ECB’s Governing Council.” A sentence that resonates as a reminder of sovereignty: if debt stabilisation becomes conditional on external assistance, political room for manoeuvre shrinks, and the trade-offs shift.

So how can stabilisation be achieved? The debate moves towards the notion of the “primary balance”: the balance of accounts before interest payments. In 2024, it would be in deficit by around 4 points of GDP, or €120 billion; in 2025, around 3 points, or about €100 billion. The order of magnitude of the effort required is therefore massive. And it is even greater, he explains, when adding two needs that are set to rise: defence spending, in line with NATO objectives, and investments linked to the climate transition. In this equation, a column co-signed with Olivier Blanchard (mentioned during the discussion) points to the need to generate a primary surplus under certain conditions: in other words, to regain a financing capacity “excluding interest” — a step that forces a choice between spending cuts, revenue increases, or a mix of both.

This is where a phrase returns, almost like an institutional refrain: “75% savings, 25% compulsory levies,” a recommendation often associated with the Banque de France and the Court of Auditors. “I agree… but we won’t do it,” he states bluntly, recalling a historical fact: France has more often chosen the opposite, and sometimes beyond that.

Questions from the audience then open up “classic” avenues — and their limits. The fight against tax fraud? Yes, he replies, there is something to be gained; tools have been strengthened and international cooperation has progressed, but the sums recovered remain far from what is needed: a few billion gained over fifteen years, a far cry from the hundreds of billions discussed when talking about medium-term stabilisation. Immigration as a lever for the workforce? In theory, the effect can be favourable in the short to medium term if integration into the labour market works; in France, he nuances, the issue of qualifications and employment is central. A national loan? Often costly, sometimes more so than market borrowing, especially when accompanied by tax incentives. Capitalisation for pensions? Possible at the margins, but difficult to generalise without touching a “mastodon”: life insurance, its tax advantages, its liquidity, and its place in savings behaviour.

The room also returns to a very concrete point: who holds French debt? The answer is almost frustrating: we know imperfectly, because the securities trade on global markets. Some broad categories can nonetheless be identified: around 20% held via the central bank (as part of asset purchases), just under 30% by French residents (life insurance, banks, funds), and a little over half by non-residents — without fine granularity on the final chain of holders.

As the exchange unfolds, another risk emerges in the background: that of a “slow decline.” One participant mentions the performance of public policies; another speaks of a country that is “too big to fail.” François Ecalle does not rule out the absence of a brutal crisis, but rather a gradual weakening: uncertainty, underinvestment, defensive trade-offs by households and businesses. He then evokes the idea of a possible “Ricardian effect” (when rising debt encourages higher savings), and points to a troubling signal: the post-Covid savings rate does not appear to have fallen back as expected.

The conclusion takes a cultural detour. Questioned about the French “technostructure,” administrative layering, and the constant expectation of a response from the state, he replies almost as a historian: “Re-read Alexis de Tocqueville.” Jacobinism, the idea that everything flows back to the top, and the reflex to produce spending or regulations in response to every problem — for him, these longstanding mechanisms still weigh on our ability to reform quickly and decisively. And while the country delays, the necessary effort increases.

“The longer we wait, the greater the effort will be. It’s better not to wait,” he concludes. In the room, the feeling is shared: no immediate catastrophism, but a clear warning about the trajectory. Stabilising the debt is not merely an accounting exercise: at its core, it is a question of credibility, sovereignty and collective choices.

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