The rise and rise of public debt

Public debt continues to rise across advanced economies, creating economic and geopolitical risk exposures

I began writing this note in Paris (in town to talk to global dairy executives about global economic and geopolitical dynamics).  But beyond the autumnal beauty of Paris, economic and political stress and uncertainty is evident.

A messy domestic political context (since the snap legislative elections in July) is worsening fiscal challenges.  The French budget deficit is ~6% of GDP, well in excess of the EU’s 3% target (France is already under the EU’s excessive deficit procedure).  The recent French budget proposed by new PM Barnier pushed the deadline for meeting this target out to 2029, relying on a large number of temporary revenue raising measures.  Markets are unimpressed: the bond spread between French and German 10 year government bonds recently touched 80bp, a multi-year high.

Of course, France is not the only country facing fiscal challenges.  The new UK government are delivering their first budget on October 30, juggling a high and growing debt profile with the need to finance…