He promised Napolitano that, if the Monti government materializes, he, Nicolas Sarkozy, will come in person to Rome to directly support the new Executive, just appointed. He allegedly told the Italian President in a phone call yesterday evening: these are the rumors circulating in Paris. Shortly before, Sarkozy had asserted peremptorily: "Italy needs to get Italy back on track." He's right, indeed. But many of his compatriots are beginning to wonder: how to get France back on track?
The situations of the two countries appear light years away. Italy with its public debt now over 120% of GDP. France, on the other hand, which still stands at just over 86%. France, which can still count on the top marks for sovereign debt from all rating agencies, including the coveted triple A from Standard & Poor's: belongs to the platoon of the first in its class worldwide. Italy, on the other hand, which could even slip into the fateful default. For the two most similar countries, also in terms of size in Europe, two diametrically opposed situations? Let's not exaggerate. "After Italy and Greece, will it be France's turn?" wondered the newspaper Le Monde, with a headline in large letters on the front page. Yes, because speculators have targeted Oats, French government bonds, equivalent to our BTPs. Here too, spread and yield problems.
On Thursday, the gap between ten-year Oats and their German counterparts jumped to 170 basis points, the record since 1997, before the euro. Just to get an idea: in July it was around 60. As for yield, the threshold of 3,465% was reached on Thursday, against 2,5 in last July. The yield is still half that of ten-year BTPs, even if now a little less, since the beneficial Monti effect made itself felt. But it is double that of the Bunds, the titles of Germany, another rare country to have recognized the triple A. It will be said: these data have been inflated by a strange accident. Around 15 pm, S&P sent a summary message to its subscribers on Thursday afternoon: «Sovereign debt, France, downgrading». Only after a few minutes that downgrade was denied. "Technical error," they said from New York.
Really a road accident? Not everyone in Paris is convinced of this. France's exit from triple A is seen as increasingly likely in financial circles. And in fact yesterday the improvement in Oat spreads and yields was only relative. The former stood at 150 bps at the end of the day, not so much because the interest rate on French bonds fell, but above all because that on Bunds increased. In reality, the yield on Oats again touched the maximum level on Thursday to fall back at the end of the day to 3,378%. The tension remains high. Meanwhile, a popular economist like Jacques Attali underlined: "Let's not delude ourselves: on the market, the rating of the French public debt is no longer triple A". Marc Touati, economist at Global Assya, increased the dose: «The question now is no longer whether France will abandon the triple A, but when. The widening of the spread with the Bunds reflects an objective difference in the management of state finances: since 2001 the public deficit has averaged 4,1% of GDP in France and 2,5% in Germany».
The problems of Paris primarily concern the real economy. The European Commission predicts in 2012 (the data are from two days ago) a growth in GDP of 0,6% instead of the +2% which Brussels was aiming for previously and against the forecasts of the French Government still today of a leap forward in 1 percent. Not only that: beyond the triple A, a series of things are even worse than in Italy. Unemployment is approaching 10% (against 8,3% in Italy). The public deficit at the end of 2011, almost under control in Italy (3,7% of GDP), is estimated in Paris at 5,8% for the same deadline. Meanwhile, for 2012 Italy is expected to have a primary surplus (before payment of interest on the debt) of 2,6% against a deficit of 2,1% in France, where the state continues to spend more than it really can afford. Among other things, the debt is in absolute terms lower than the Italian one (1.700 billion euros against our 1.900), but 57,9% of the total is held by foreigners (42,4% for the Italian one): a another factor of weakness. As for French household debt, at the end of 2010 it represented 55,1% of GDP against 45% for Italy. Without counting 61,6% of Germany, 91,7% of the USA and 114,2% of the United Kingdom, the land of David Cameron, who every other day teaches little lessons to Italy. French companies are also much more indebted than Italian ones. If Paris has now entered the crosshairs of speculators, it is no coincidence.
