” Segregate Covid Debt “As the government has announced it wants to do when opening consideration of the third amending finance bill, it is a useless and dangerous device. This debt was contracted to meet the exceptional expenses generated by a sudden and brutal crisis, as well as an exceptional drop in tax and social security revenues. All of which made the debt jump by 270 billion euros, and the debt-to-GDP ratio from 100% to 120%!
To confine 150 billion euros – this is the figure announced by the government – would be to confine, to isolate, “bad” debt to separate it from the rest of the “good” debt, ordinary debt.
The pace of crises in our country has accelerated. From centennials, they have become decennials. We didn’t create “financial crisis” debt in 2009, or “yellow vests” debt in 2019, so why create “Covid debt” today? We cannot begin to fragment our indebtedness in this way. The only separation that makes sense is between investment debt and operating debt.
Contained debt, affected revenue
But the real risks lie elsewhere. There are two main ones: the temptation for the ruling power to raise taxes on the one hand; and that of avoiding efforts to cut public spending, on the other hand.
Raising taxes, first of all. The government wants to manage ” responsibly [l’] amortization Of this debt. The only recent debt settlement precedent is Cades, created in 1996, a fund that amortizes social debt. The CRDS, social contribution, was created for this purpose. Scheduled to expire in 2024, it will be extended at least until 2033, in particular to amortize part of the debt due to Covid-19.
With confined debt, assigned revenue. So a new tax! And if the government, for example, allocates a share of VAT to the repayment of the confined debt, a share which will have to be compensated elsewhere, it would only be a more discreet way of proceeding to the indirect increase in existing taxes…
The second risk is to avoid the annoying subject, namely the reduction in public spending. To separate the “Covid debt” from the initial 100% of public debt on GDP is to disguise the reality of our financial situation, by explaining that the “good” figure is more 100% than 120%. The imperative obligation to control our public expenditure, and to restore our accounts would then be less strong. It would be a decoy. Old reflexes, old habits …
On the contrary, we really have to get down to defining priorities in our public policies in order to tendently lower our spending, control our deficits and increase our growth potential. We can’t keep watering the sand. To really tackle the efficiency of our public spending is to respect the taxpayer.
Beyond these two main risks, confining the debt would constitute an ambiguous signal sent to the creditors of our country. The government said, ” We owe this Covid debt ’. “Is there, by contrast, a debt that we will not repay? Or that we would reimburse less than another? We must be careful, at a time when private debt, too, is reaching dangerous heights and will weigh on the balance sheet of businesses and the recovery.
Finally, the government indicates that Germany ” conduct the same exercise ” Germany is in a very different situation from ours: from 60% debt to GDP before the crisis, Germany will, by the end of 2020, probably be above about 75%. 45 points less than us: another world…
What we really need, rather than a quarantined (years?) Debt, is a clear, legible and stubborn strategy to restore our public accounts. And that it be presented and discussed in Parliament and explained to the French in a simple and direct way. ” Rebuilding a public finance strategy “, As the Court of Auditors wishes and solemnly submit it to Parliament, is a political priority.