00:00From the Middle East to France now.
00:02The country is facing a dangerous economic and political balancing act.
00:06Thousands of students are taking to the streets, demanding more resources in better conditions,
00:11while the government is struggling to repair public finances already under severe pressure.
00:17With the deficit around 5% of GDP and public debt approaching 120%,
00:23Paris has very little room to spend its way out of the crisis.
00:28So, how serious is the risk of a wider economic and political crisis?
00:33To get to the bottom of this, I'm now joined by French economist and essayist Nicolas Bouzou.
00:38Good morning to you.
00:40Good morning.
00:41So, you said, already in June, that the situation in France was a catastrophe.
00:48Well, things haven't gotten any better since.
00:50Is France the sick man of Europe?
00:54Yeah, I think that the situation is very tough because we are at the end of the system.
01:01I mean that we have in France, as you know, a very big welfare state, very large.
01:06So, it's a good thing.
01:07But the economic growth is not more strong to be able to support this welfare state.
01:17And that's why we suffer from a huge deficit, from rising public debt.
01:24And the most worrying point is that our long-term interest rate, they are going to 5%.
01:31And economists know that 5% for an economy like France is an unsensensible interest rate.
01:40I mean that the public debt is automatically rising.
01:44So, yes, it's a quite difficult situation.
01:46Nicolas, what worries financial markets more?
01:49France's level of debt, its persistent deficits, or the apparent political inability to agree on spending cuts?
01:57Both.
01:58The public debt is huge, but other countries have big public debt.
02:03So, I think that the main problem is the public deficit.
02:06I mean the fact that we are not able to reduce our public debt.
02:10But the second problem, you're perfectly right, is the political uncertainty, because the government has not a majority at the
02:19parliament.
02:20But we have a presidential election in five months, which is very, very large.
02:27Far-right can win, but far-left can win.
02:31And their programs are not very precise in the challenge of the public debt.
02:36And looking ahead at the presidential election next year, with both extremes gaining ground, is the worst yet to come?
02:45Very briefly.
02:46No.
02:47In France, the economic situation, basically, we have some strength.
02:52Electricity, a very strong corporate sector, a government, which is quite competent.
03:00I mean, so I think that basically the situation is not so bad, but we are facing a big problem
03:08of public finance.
