In 6 months, the state debt burden for 2022 already exceeds that of the whole of 2021

Household budget and taxation

In 6 months, the state debt burden for 2022 already exceeds that of the whole of 2021

Budget and taxation

02 September 2022 • Samuel-Frédéric Servière

The state monthly budget situation for July 2022 was just released in early September. What is surprising in addition to the explosion in tax revenue (+28.36 billion net revenue, or + 19.7% on a current basis) is the record level reached by the burden of the state debt: 39.382 billion euros, or + 48.9% compared to July 2021 (26.457 billion euros). And this record level now exceeds the level reached by public debt service in 2021 (38.496 billion) by almost 1 billion euros (+886 million euros).

This increase in the debt burden is due to several cumulative phenomena: the impact of (index-linked) OATi of which over 60% are index-linked to European inflation (OATi €) which adds an additional burden compared to inflation-linked securities national (lower because of purchasing power measures relating to the control of certain prices). The interest rate effect also comes into play with the rise in the reference rates of the European Central Bank (already from July + 0.5% and undoubtedly soon in September + 0.75%).

In budget accounting, the burden of the state debt and its evolution is cumulatively divided as follows:

Source: Monthly state budget situation (SMBE), January-July 2022 and previous years.

If we want to follow the monthly expenses, the explosion of the debt burden is even more explicit with a peak of € 16.7 billion:

Source: Monthly state budget situation (SMBE), January-July 2022 and previous years.

Been given the sequence of expenses on a monthly basisit is very likely that the debt burden of the state will exceed € 50 billion by the end of the year : the level budgeted in LFI 2022 was expected to be 38.656 billion euros in LFI 2022; the supplementary budget of August 16, 2022 adds 11.886 billion of additional credits (valuation credits), or an expected total public debt burden of 50.54 billion euros.

Furthermore, in the national accounts, the 2022-2027 Stability Program[1] allows you to adjust the trajectory of the debt burden for the years to come:

In the national accounts

2019

2020

2021

2022

2023

2024

2025

2026

2027

Interest expense (in% of GDP) all APUs

1.4

1.3

1.4

1.8

1.6

1.7

1.9

2.0

2.1

Interest expense (in billions of euros) all APUs

35.3

29.6

34.7

46.3

43.9

48.2

55.6

60.5

65.7

Interest expense (in billions of euros) from the state

30.1

24.3

30.1

42.2

Interest expense (in billions of euros) of the ODAC

0.5

1.5

1.2

Interest expense (in billions of euros) of APUL

1.3

1.1

0.9

1.3 *

Interest expense (in billions of euros) of the ASSO

3.5

2.8

2.6

2.8 *

Source: 2022-2027 Stability Program and iFRAP Foundation calculations. Note : p.35, the burden of the State debt is to be understood as State + ODAC, it would rather be the debt of the APUC. * IFRAP Foundation calculations September 2022.

It should be noted that between 2021 and 2022 the public debt burden is expected to increase by almost 11.6 billion euros (from 34.7 billion to 46.3 billion euros). The public debt burden “would fall” in 2023, due to various factors not mentioned at this stage (European inflation better controlled by the central bank, overcompensation of the cost of raising interest rates, mobilization of state liquidity, etc.). The government sets a date for an expected debt burden in 2027 at nearly € 65.7 billion, largely due to rising interest rates. However, this latter perspective is to be considered with great caution because it is based on the rapid effectiveness of the monetary policy implemented by the ECB.and in particular to combat inflation and its divergences in the various euro area countries[2].

Finally, it should be noted that the debt burden of local public administrations is subject to multiple readings (depending on whether or not the costs of banking intermediation (bank loans) are included) due to its high level of banking operations.

In the national accounts

2019

2020

2021

2022

Interest expense (in billions of euros) of APUL

1.3

1.1

0.9

1.3

Interest expense (in billions of euros) of APUL including the cost of banking intermediation

4.4

4.3

4.0

4.4

Interest expense (in billions of euros) of the ASSO

3.5

2.8

2.6

2.8 *

Source: INSEE and iFRAP Foundation calculations September 2022.

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