Nicolas Sarkozy was slow to show any sign of realising that there was such a thing as public debt. The French president took office on the eve of the financial crisis, in 2007, but spent money as a usual, happy-spending French president. He could partly hide behind the need to fight the recession. Meanwhile France has remained one the six euro zone countries still rated triple-A. But its finances resemble Portugal’s more than Germany’s: it hasn’t balanced a budget since 1976, and public debt will top 87 percent of GDP next year.
Sarkozy woke up to debt realities in 2009, when opinion polls started showing that the French were more concerned about their country’s finances than he seemed to be. Since the beginning of the euro debt crisis, the fear of losing the top rating has shaped much of the government’s policies. Sarkozy’s conciliatory response to whatever position German Chancellor Angela Merkel takes have much to do with the necessity to keep the support of the euro zone’s strongest country, in sickness or in health.
The fear has been productive. The French government has become more serious over the budget, even though much remains to be done. But the ratings obsession is also worsening Sarkozy’s tendencies to go for short-term fixes. Facing re-election next May, his popularity is at an all-time – and euro zone – low. For a man with one foot already in his political grave, a downgrade would be a political shocker that could push the rest of him over for good.
There’s a huge difference between fixing France’s finances in the long term and obsessing about the ratings agencies in the next few weeks. Over the weekend France’s fears showed up both in the Dexia bailout negotiations and in Sarkozy’s talks with Merkel on recapitalising euro zone banks. In both cases France’s main goal seems to be to avoid committing public funds, which could put the rating at risk. But the government will eventually have to pay, one way or another, for past mistakes and follies.