France is sitting on a time-bomb of massive public debt as a fragile economic recovery takes hold, the French head of the World Trade Organisation (WTO) warned on Friday.
“There is a bomb under the current recovery — public debt,” Pascal Lamy, secretary-general of the World Trade Organisation, said on French station Radio Classique.
Even before the world economic crisis, France had “a considerable budget deficit,” he said. “In a time of crisis, when you need to put in public money to keep the economy turning, that gets worse.”
France and other countries have deepened their debts as they have boosted spending to crawl out of recessions brought on by last year’s financial collapse.
The International Monetary Fund warned in July that rising public debt of the major developed countries could undermine efforts to spur economic recovery.
Global ratings agency Fitch warned last month that top economies including the United States, Britain, France, Germany and Spain could endanger their creditworthiness if they do not bring down public debt.
France’s public debt — a figure that covers central and local government spending and welfare budgets — reached a record of more than €1,4-billion by the end of June.
According to the French government’s budget released on Wednesday, France’s public debt will soar to 84% of national output in 2010, up from 68% at the end of 2008.
“It will be necessary to explain to citizens and economic players how this growing mountain of debt is going to be handled,” Lamy said. — AFP