Fitch has lowered the sovereign note of France from Aa- à A+, mainly because of government instability and difficulties in reducing the public deficit. This situation reveals the failure of the French government, but also massive interventions of the European Central Bank (ECB).
In short
- Fitch has lowered the sovereign note of France, from Aa- à A+, due to government instability and difficulties in reducing public deficit.
- French debt reaches 114 % of GDP.
- The ECB has created perverse incentives with its negative rates and bond purchase programs.
A French debt that worries markets
Bayrou fell, but French debt continues to widen and worry the markets.
The risk of default over five years has jumped 20 % in twelve months. This risk is generally measured via the price of CDS (Credit Default Swaps) and sovereign rates.
Even more alarming, the return on French obligations to two years exceeds that of Spain and Greece.
This reversal of risk premiums perfectly illustrates the extent of the crisis. France, formerly a model of European tax stability, pays its debt more dearly than countries considered to be more fragile. It is a historical reversal!
Finally, the not provisioned retirement commitments Represent thousands of billions of euros and tarnish the French table a little more.
The ECB, accomplice of budgetary irresponsibility
The European Central Bank has a major responsibility in this drift. Its key rates increased from more than 4 % in 2008 to a negative territory For years. This accommodating policy has removed any disciplinary mechanism in budgetary matters.
THE bond purchase programs like the Pepp (Pandemic Emergency Purchase Program) and OMT (Monetary operations on securities) saturated the bond markets. They created a massive eviction effect penalizing credit to families and businesses. In parallel, they masked the solvency problems of European states.
L'anti-fragmentation tool of the ECB has further aggravated this situation. By promising unlimited interventions, the ECB reassures the markets that it will support sovereign debt at any price. This implicit guarantee completely dilutes discipline that risk premiums in the past imposed on spending governments.
THE latent losses From the ECB on its purchasing programs reach several hundred billion euros, which illustrates the extent of this disguised monetization of the debt.
The ECB has accelerated the zombification of Europe
The European Union has reduced its emissions without any economic growth. Unlike the United States which combines reduction in emissions and growth, Europe sacrifices its competitiveness.
L'productivity gap With the United States continues to widen. This difference explains 72 % of the GDP difference per capita. By subsidizing unproductive activities and penalizing high -added sectors such as technology, the EU methodically destroys its productive basis.
THE European technological decline is striking. The venture capital funds raised in the United States represent 3.2 times those of the EU. Investments on venture capital in start-ups reach the European level 2.3 times. This weakness of innovation condemns Europe to dropping out.
The long -term growth projections of the ECB increased from 2.6 % to much lower levels. This constant decline revision translates the ineffectiveness of European interventionist policies.
The digital euro burst or desire for the ECB to control everything?
Faced with this loss of competitiveness, the European authorities are preparing their response: thedigital euro. Officially intended to modernize payments, this tool is actually an unprecedented control instrument.
The digital euro will allow authorities to monitor all transactions in real time. Unlike current electronic systems, data will be directly accessible to governments and the central bank. This generalized monitoring Disguised as technological progress fundamentally threatens individual freedoms.
The programmable nature of this digital currency authorizes the authorities to create or destroy the money supply according to their needs. It also rewards or penalizes behaviors deemed to be in accordance with or not to political objectives.
This extreme monetary centralization aims to maintain the state monopoly of currency in the face of the growing distrust of citizens and the development of non -censive alternatives like Bitcoin. The digital euro therefore constitutes, not a desirable financial innovation, but the final attempt to preserve a dysfunctional economic system by technological constraint.
The ECB carries overwhelming responsibility in the current French debt crisis. Its accommodating policies have abolished the natural mechanisms of budgetary discipline and encouraged the fiscal irresponsibility of the Member States. European governments, assured of inexpensive financing, no longer have any incitement to reform their budgets. Faced with the zombification situation of Europe, the digital euro is today the final attempt of the ECB to maintain its control in the face of this crisis of confidence. This technological forward flight will not solve any structural problem and may definitively compromise the credibility of the euro as a global reserve currency. Alternatives like Bitcoin could then establish itself to preserve its savings from generalized state control.
Maximize your Cointribne experience with our 'Read to Earn' program! For each article you read, earn points and access exclusive rewards. Sign up now and start accumulating advantages.
