![What if the drop in its rating did France a favor? What if the drop in its rating did France a favor?](https://media.lesechos.com/api/v1/images/view/6667f6378acaf44a680e76ca/1280x720/01101778802353-web-tete.jpg)
By Cécile Philippe (president of the Molinari Institute, columnist for “Echos”)
The S&P rating agency has once again downgraded the French debt rating to AA-. France had already lost its triple A in 2012, sanctioning the long deterioration of its public accounts.
The rating agency is unfortunately not wrong regarding the French financial situation stuck in a dilemma that it seems incapable of resolving. Indeed, failing to recognize the weight of a debt that is “invisible” at first glance, it condemns itself to attempts at marginal and often unpopular savings.
It is time to recognize the constrained weight of retirement debt and find a constructive solution.
Break out of our lethargy
The recent drop in the French rating should serve as an alarm and shake us out of our lethargy with regard to aging, the main cause of the inexorable increase in public deficits. With all due respect to the Court of Auditors, or to the Pension Orientation Council, which for twenty years omitted the deficit generated by public pensions, namely 2% of GDP each year, the data for France are certainly well hidden but difficult to deny.
Pensions explain 41% of the increase in public spending since the end of the baby boom. Each year, the State needs 60 billion euros to pay the pensions of former civil servants and several tens of billions of euros to finance measures limiting the perverse effects linked to soaring social security contributions in the private sector.
It is the simple consequence of the end of the baby boom and the current inability to adapt to it. However, this trend was known, the law of March 14, 1941 which introduced the distribution specified: “When the number of retirees increases with the rise in the average age of the population, the massive pension service imposes an unbearable burden on productive elements. “.
Collective capitalization
We are here and by failing to tackle the problem head on, we are missing the essential point: we must not deny our promises, but live up to them by saving money. taxpayer’s money. Financing part of pensions through collective capitalization would support the struggling distribution and make it possible to improve purchasing power, competitiveness and public finances.
Providing civil servants’ pensions would make it possible to self-finance with capital gains and dividends part of the promise made to civil servants who already benefit from a pension fund yielding an average of 3.7% from 2006 to 2022.
Generalizing collective capitalization in the private sector would make it possible to counterbalance the erosion of the purchasing power of future retirees whose pensions are not guaranteed.
Good debt and bad debt
Obviously, France, already the champion of compulsory deductions, cannot envisage passing the cost of the increase in provisioning and collective capitalization onto taxpayers. We will therefore have to rely on public debt.
Can we even think about it at the risk of further degrading the French rating? Yes, because the agencies know the difference between good and bad debt.
Transforming French debt into an investment capable of generating dividends and capital gains – to relieve pension payments while providing the capital necessary for growth – has something to appeal to the financial markets. This is the best way to restore public accounts and build a better future.
Cécile Philippe, Molinari Economic Institute