Report raises alarm over French finances

France’s debt-ridden public finances are in a “very worrying” state, a government-commissioned report warned, urging the country’s leaders to balance the budget by 2010 at the latest.

The report, prepared by an expert panel headed by BNP Paribas Chairman Michel Pebereau, charts a fivefold increase in France’s debt over the last quarter of a century.

France’s debt is set to reach €1.2 trillion by the end of the year, the report confirms – about 66% of France’s national output.

“The constant increase of our debt over the last 10 years clearly distinguishes us from our partners,” Mr Pebereau told reporters.

“During the same period, most other European countries realised what was at stake and worked to reduce their financial debt.”

In response to the report, prime minister Dominique de Villepin promised a public finances conference in January to plot France’s path to trim debt.

Mr Villepin said he aims to cut the level of public debt as a percentage of gross domestic product to 60% from 66% in five years. He did not specify exactly when the programme would start.

“The goal of these five years is to reach a balance in our public finances,” he said in an interview on France-2 television.

“France spends too much, and too badly,” he added.

Sometimes scathing in its conclusions, Mr Pebereau’s report also warned that France has “off-balance sheet” public pension liabilities which help take the state’s total liabilities to well over €1.9 trillion.

“In view of these figures, our financial situation today appears to be very worrying,” the report states.

It also points a finger at France’s bloated civil service, which it said had grown by 14% or 300,000 staff between 1980 and 2003 – even as the state’s responsibilities were shrinking.

Finance Minister Thierry Breton warned parliamentarians last month about the pensions crunch expected in 2010 – when France will no longer have enough workers left to fund pensions for the swelling ranks of retirees.

As he presented Pebereau’s report today, the minister used unusually frank language.

France’s national debt represents a “slide away from our commitments” to European partners, Breton said. “France is living collectively above its means.”

France has broken the European Union’s public deficit limit – 3% of gross domestic product – for three straight years. It is also in breach of an EU rule requiring governments to keep their accumulated debts below 60% of GDP.