Paris (AFP)

France's public debt increased sharply in the third quarter to reach 100.4% of GDP, exceeding national wealth for the first time since 2017, INSEE reported on Friday, but the government maintains its forecast of 98.8% for the end of the year and anticipates a decline for 2020.

Public debt increased between the end of June and the end of September from 39.6 billion euros to 2.415 billion euros, said the National Institute of Statistics. It is not the first time that French public debt has exceeded 100% of GDP, at least according to the new calculation method, which incorporates SNCF debt.

In 2017, it had thus reached 100.5% in the first quarter then peaked at 100.8% in the second quarter, according to the latest revised figures from INSEE. But that year, the public debt announced had remained below the 100% mark because the debt of the public operator of the railways had not yet been integrated. The ratios were recalculated retrospectively the following year.

Despite the 0.9 point of GDP increase in public debt in the third quarter, the government is maintaining its debt reduction trajectory.

"This does not therefore call into question the government forecasts, at 98.8% of GDP at the end of 2019, because the debt ratio at the end of 2019 will be lower, after major capital repayments in October and November", AFP learned from the Ministry of Public Accounts after the publication of INSEE figures.

"It will not be," predicted Bruno Retailleau, the leader of the Senate Republicans who judges that "the situation continues to deteriorate" and speaks of a "dangerous" drift, which will be aggravated by a "pension reform which will cost the French dearly".

- "Technical reasons" -

The government explains that "this increase in debt in the third quarter was expected" and "comes from technical reasons related to debt management". "More specifically, it comes from the calendar of issues and redemptions of debt securities," says the same source. The government recalls anticipating "that the debt ratio will begin to decline from 2020".

INSEE explains for its part that at the end of September, the "increase comes mainly from long-term negotiable debt (+35.8 billion euros) and to a lesser extent from short-term negotiable debt (+ 4.1 billion) ".

"This increase in government debt is accompanied by a significant increase in its cash flow (+22.5 billion)," added INSEE in a press release.

The institute warns that "the variation in the debt does not allow the public deficit to be deducted", and that the gross public debt is not exactly the same as the debt within the meaning of the Maastricht Treaty, from which "the change in financial assets and liabilities ".

The Maastricht Treaty stipulates that the public indebtedness of the states of the euro zone must not exceed 60% of the GDP, and that the public deficit must be contained under the bar of 3% of the GDP.

In France, the debt has not been below 60% of GDP since the third quarter of 2002.

In 2018, slightly stronger than expected growth, at 1.6% instead of 1.5%, had allowed public debt to stabilize at 98.4% of GDP.

In 2019, the expected increase in GDP is only 1.3%, and the public deficit, limited to 2.5% last year, should climb to 3.1% due to the replacement of the CICE by a reduction of long-term charges for businesses, which in 2019 leads to a temporary shortfall for the State of around 20 billion euros, or 0.9 point of GDP.

© 2019 AFP