Debt: Average interest rate in France explodes to 3.15% in 2023, highest in 15 years

A sharp rise in interest rates in the markets resulted in France in 2023 with the highest average interest rate since 2008, following the Great Financial Crisis. The rise in government interest rates is a result of the European Central Bank’s policy, which massively increased its key rates from July 2022 to fight inflation. This move had an impact on other interest rates in the economy, including government borrowing rates.

The symbolic bar of 3000 billion was exceeded

But for the past month, many market participants were convinced that central banks would cut their key rates in the first months of 2024, which would allow interest rates in countries like France to fall. On average and over all borrowing periods combined, France borrowed at 3.15% in 2023, said Agence France Trésor (AFT), the Berca-affiliated organization responsible for placing French debt on financial markets. This is a much higher average than in 2022 (+1.04%) and than in 2021, where it was even negative (-0.28%).

In June, France’s total debts exceeded 3,000 billion euros for the first time. Debt is almost 110% of gross domestic product (GDP). The debt burden, which represents the interest France has to pay each year on its various loans, has risen significantly over the past two years as a result. In the presentation of the budget for 2024 by the Ministry of Economy and Finance, it represented 51.7 billion euros in 2023, but it should increase by 61 billion by 2026.

In 2008, the average interest rate was 3.88%. After the financial crisis, central banks began to initiate the process of lowering their key interest rates to support the economy and markets. This move had an impact on other interest rates in the economy, including government borrowing rates. The most influential US central bank will conclude its last meeting of the year on Wednesday, and the European Central Bank meets on Thursday.

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