COMMISSION STAFF WORKING DOCUMENT In-depth review for France in accordance with Article 5 of Regulation (EU) No. 2011/1176 on the prevention and correction of macroeconomic imbalances Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2022 European Semester – Spring Package
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: European Semester, France, economic policy, economic recovery, energy policy, indebtedness, macroeconomics, multilateral surveillance, productivity, public debt

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.5.2022  SWD(2022) 632 final  COMMISSION STAFF WORKING DOCUMENT In-depth review for France             in accordance with Article 5 of Regulation (EU) No. 2011/1176 on the prevention and correction of macroeconomic imbalances               Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2022 European Semester – Spring Package {COM(2022) 600 final} - {SWD(2022) 628 final} - {SWD(2022) 629 final} - {SWD(2022) 630 final} - {SWD(2022) 631 final} - {SWD(2022) 633 final} - {SWD(2022) 634 final} - {SWD(2022) 635 final} - {SWD(2022) 636 final} - {SWD(2022) 637 final} - {SWD(2022) 638 final} - {SWD(2022) 639 final}  
 
 
On the basis of this in-depth review for France undertaken under Regulation (EU) No 
1176/2011  on  the  prevention  and  correction  of  macroeconomic  imbalances,  the 
Commission has considered in its Communication “European Semester – 2022 Spring 
Package” (COM(2022)600 final) that: 

France  is  experiencing  imbalances.  Vulnerabilities  relate  to  high  government  debt  and 
weak competitiveness,  which have  cross-border relevance, in a context of low productivity 
growth.  The  COVID-19  crisis  brought  about  a  sizeable  increase  in  the  already  high 
government debt, but with the economic recovery, the government debt-to-GDP ratio edged 
down in 2021 and is forecast to keep falling this year and next, while remaining well above 
its  pre-pandemic  level.  Private  indebtedness  has  kept  growing  in  recent  years  and  is 
exceeding  prudential  levels,  although  risks  relating  to  increased  corporate  indebtedness  are 
somewhat  mitigated  by  a  parallel  build-up  of  liquidity  buffers.  Underlying  productivity 
dynamics  have  remained  stable  over  time.  Exports  market  shares,  which  had  broadly 
stabilised  in  earlier  years,  decreased  sharply  during  the  pandemic  with  key  export  sectors 
being  severely  hit  but  a  sizeable  recovery  is  projected  for  2022  and  2023.  Cost 
competitiveness,  as  well  as  productivity,  are  set  to  benefit  from  recent  and  upcoming 
reforms, including a continued strong implementation of the RRP. 

1 

 
 
 
 
 
 
 
 
 
CONTENTS 

1.  Introduction 

2.  Assessment of macroeconomic imbalances 

3.  Thematic chapter: Private Indebtedness 

LIST OF TABLES 

Table b.1.1:   Selected exposures 

Table 2.1: 

Selected economic and financial indicators (Part 1), France 

Table 2.2: 

Selected economic and financial indicators (Part 2), France 

Table 3.1: 

Private debt indicators, France 

LIST OF GRAPHS 

Graph b.1.1:  Sectoral distribution of energy use and of energy imported from Russia 

Graph 3.1: 

Private indebtedness 

Graph 3.2: 

Household debt 

Graph 3.3: 

Non-financial corporate debt 

3 

4 

10 

7 

8 

9 

16 

7 

10 

11 

15 

2 

 
 
 
 
 
 
1.  INTRODUCTION 

In  2021,  over  the  previous  annual  cycle  of  surveillance  under  the  Macroeconomic  Imbalances 
Procedure  (MIP),  the  Commission  identified  “macroeconomic  imbalances”  in  France. (1)  These 
imbalances  were  related  to  high  public  debt  and  weak  competitiveness  dynamics  in  a  context  of  low 
productivity growth,  which carry cross-border relevance.  The 2022 Alert Mechanism  Report concluded 
that  a  new  in-depth  review  (IDR)  should  be  undertaken  for  France  with  a  view  to  assessing  the 
persistence of imbalances or their unwinding. (2) 

After the sharp rebound in 2021, economic activity is set to expand strongly in the coming years. (3) 
Despite  important  headwinds  including  new  waves  of  COVID-19,  rising  energy  prices  and  supply 
bottlenecks, growth remained robust in the fourth quarter of 2021, with GDP expanding by 0.8% on the 
quarter and activity exceeding its pre-crisis level by 1.0%. Overall, after a rebound by 7% in 2021, annual 
GDP is forecast to increase by 3.1% in 2022 and 1.8% in 2023. The real GDP level in 2023 is forecast to 
be 3.4% above its 2019 level. Russia’s invasion of Ukraine has placed a drag on the economy, due to the 
continuous  disruption  in  supply  chains  and  the  surge  in  energy  prices.  HICP  is  set  to  peak  in  2022, 
reaching  4.9%,  as  a  result  of  the  increase  in  energy  prices  and  the  delayed  transmission  of  supply 
disruptions to industrials goods. In 2023, energy prices are forecast to contribute little to inflation. In turn, 
prices  of  services  are  expected  to  accelerate  as  a  consequence  of  wage  increases  supported  by  past 
inflation  and  labour  shortages.  Overall,  HICP  is  set  to  fall  to  around  3%,  remaining  however  more 
dynamic  than  before  the  crisis.  Risks  to  the  economic  outlook  are  elevated,  as  the  evolution  of  the 
pandemic,  the  implications  of  the  Russian  military  aggression  against  Ukraine  and  possible  structural 
implications of the COVID-19 crisis are still surrounded by high uncertainty.  

This in-depth review presents the main findings of the assessment of imbalances. The assessment is 
backed  by  a  thematic  section  on  private  debt  developments.  Spillovers  and  systemic  cross-border 
implications of imbalances are also taken into account. In addition, assessments of structural issues made 
in  previous  IDRs  and  in  the  context  of  fiscal  assessments  are  also  considered  if  relevant.  The  MIP 
assessment matrix is published in the 2022 Country Report for France. (4) 

(1)  European  Commission  (2021),  European  Semester  Spring  Package  2021:  economic  coordination  -  Commission 

Communication, COM(2021) 500 final. 

(2)  European Commission (2021), Alert Mechanism Report 2022, COM (2021) 741 final. 
(3)  Forecast data are from European Commission (2022), European Economic Forecast: Spring 2022, Institutional Paper 172. 
(4)  European Commission (2022), Country Report France 2022, SWD(2022)612 final. 

3 

 
 
 
 
                                                           
2.  ASSESSMENT OF MACROECONOMIC IMBALANCES 

Assessment of gravity, evolution and prospects of macroeconomic imbalances 

Despite  the  projected  decline  between  2020  and  2023,  the  general  government  debt  ratio  will 
remain high. At 97.4% of GDP in 2019, before the outbreak of the COVID-19 pandemic, public debt in 
France was already very high, due to protracted elevated structural deficits and a lack of sufficient fiscal 
consolidation in previous years. In 2020, the sharp fall in economic activity following the outbreak of the 
pandemic brought about a quick contraction in tax bases in 2020 that dragged down tax revenues. The fall 
in tax revenues and the sizeable fiscal measures deployed by the French government pushed the general 
government  deficit  to  8.9%  of  GDP,  while  the  public  debt  ratio  rose  by  some  17  percentage  points,  to 
114.6%  of  GDP  in  2020.  The  strong  economic  rebound  in  2021  and  the  dynamism  of  tax  revenues 
allowed  some  improvement  in  public  finances.  France’s  public  debt  ratio  declined  by  almost  2  pps.  in 
2021,  to  112.9%  of  GDP,  and  according  to  the  Commission  2022  spring  forecast  is  projected  to  keep 
declining,  albeit  at  a  slower  pace  due  to  still  high  public  deficits,  to  reach  109.1%  in  2023.  The 
Commission’s  fiscal  sustainability  assessment  shows  that  France  faces  high  fiscal  sustainability 
challenges over the medium term and medium challenges in the long term. (5) 

The  already  high  private  indebtedness  increased  further  during  the  pandemic,  partly  due  to 
corporate  borrowing.  After  a  continuous  increase  since  2000  and  peaking  at  174%  of  GDP  in  2020, 
private debt declined by 6 percentage points in 2021 in spite of the strong economic rebound. While the 
debt ratio in non-financial corporations declined by 4 percentage points, households’ debt declined only 
slightly. Indebtedness in nominal terms keeps being fuelled by dynamic credit flows. In the case of non-
financial  corporations,  indebtedness  has  come  along  with  even  faster  increases  in  equity  and  financial 
assets, including cash  flow. In turn, the household saving  ratio rose  significantly  in 2020 and remained 
above  pre-pandemic  levels  in  2021.  Yet,  both  households  and  non-financial  corporations  debt  keep 
exceeding  prudential  thresholds.  Moreover,  high  and  growing  public  and  private  indebtedness  have 
brought about a significant increase in external debt,  notably strong  foreign purchases of French public 
and  corporate  bonds,  thereby  leading  to  a  sizeable  deterioration  in  the  net  international  investment 
position to -35% of GDP in 2021. 

Competitiveness indicators took a hit during the COVID-19 crisis, but have begun to recover. The 
growth in unit labour costs (ULC) was moderate in the past few years before the COVID-19 crisis (2.5% 
between  2013  and  2019,  against  6.7%  in  the  euro  area),  when  large  cuts  in  social  contributions  were 
adopted (CICE and Responsibility Pact). In 2019, its growth remained significantly lower than in the euro 
area,  partly  thanks  to  further  social  contribution  cuts,  targeted  on  workers  close  to  the  minimum  wage. 
Against this background, total nominal export market shares stabilized over the 2013-2019 period. Export 
market  shares  deteriorated  significantly  more  in  2020  than  in  most  other  large  European  countries,  as 
several key export sectors were severely hit (e.g. aircraft industry and tourism). As with all countries, it is 
difficult to interpret the changes in unit labour costs in 2020, due to the negative shock on productivity 
caused by labour hoarding as a result of the partial activity work schemes. The negative shock due to the 
COVID-19 outbreak is set to be largely temporary. Cost competitiveness, as well as productivity, should 
benefit from measures recently implemented and upcoming reforms, namely the action plan for business 
growth  and  transformation  (the  PACTE  law)  adopted  in  May  2019,  the  changes  to  the  labour  market 
legislation,  the  EUR  10  bn  cut  in  production  taxes  and  those  in  the  RRP,  aimed  to  foster  innovation, 
digitalisation  and  labour  force  re-skilling,  in  conjunction  with  Cohesion  Policy  Funds.  Export  market 
shares  are  also  expected  to  rebound  over  the  next  years,  in  line  with  the  recovery  of  the  tourism  and 
aircraft industry. Overall exports and competitiveness are thus unlikely to deteriorate further; rather, they 
are set to recover. However, several structural challenges remain, and this outlook is subject to substantial 
external  risks,  namely  the  developments  of  the  war  in  Ukraine  and  the  evolution  of  the  pandemic  in 

(5)  See  European  Commission  Country  Report  on  France  for  the  latest  results  and  the  ‘Fiscal  Sustainability  Report  2021’, 

Institutional Paper 171, 25 April 2022 for methodological details 

4 

 
                                                           
2. Assessment of macroeconomic imbalances 

China.  Importantly,  further  progress  in  cost-competitiveness  will  crucially  depend  on  the  capacity  to 
enhance the productivity growth trend. 

The COVID-19 crisis has not brought about any material increase in non-performing loans (NPLs). 
In  2021,  corporate  bankruptcies  decreased  with  respect  to  2020  and  more  so  when  compared  to  pre-
pandemic years. While there is no sign of an imminent debt-linked resurgence of bankruptcies or a wave 
of insolvencies, some sectors could be severely hit by rising energy prices, supply chain disruptions and 
economic ramifications of Russia’s invasion of Ukraine (see box 2.1). In turn, while the financial sector 
remains resilient and financing conditions continue to be favourable, structural challenges related to low 
aggregate bank profitability persist. A protracted rise in inflation could lead to higher market interest rates 
that would tighten financial conditions.  

Assessment of MIP relevant policies 

Some measures have been adopted to contain the dynamics of public spending and others are in the 
pipeline. Efforts to consolidate government finances before the crisis only  modestly reduced the  public 
expenditure ratio. The COVID-19 crisis has brought about a notable increase in the expenditure ratio, to 
61.4% of GDP in 2020, the highest in the EU. While the economic rebound and the phasing out of the 
emergency measures is estimated to have reduced the public expenditure-to-GDP ratio by almost 2 pps. in 
2021, public expenditure and the general government deficit will remain at very high levels in the short 
term. Curbing public spending and increasing its efficiency is essential to reduce the general government 
deficit and to put public debt ratio on a steady downward path. The French Recovery and Resilience Plan 
includes  measures  aimed  to  support  the  consolidation  of  public  finances  in  the  medium  and  long  term. 
The organic law on the modernisation of public finances management has entered into force in 2022. It 
introduces a multi-annual expenditure rule applicable to total public spending, aimed at strengthening the 
multiannual dimension of budgetary decisions, alongside an extension of the prerogatives of the national 
fiscal council (i.e., High Council of Public Finances, HCPF). The contribution of this reform to ensuring a 
sustained  reduction  of  public  debt  will  depend  on  its  implementation,  which  will  warrant  close 
monitoring. Preliminary steps were also taken to pave the way for the evaluation of public spending as of 
the fourth quarter of 2022, with the aim of identifying the most efficient expenditures favouring growth, 
social inclusion and the green and digital transition. However, the reform to unify the numerous pension 
schemes  in  France  was  put  on  hold  after  the  outbreak  of  the  COVID-19  pandemic.  While  the  previous 
government announced in March 2022 the possibility of increasing the retirement age, no calendar for a 
reform of the pension system has been put forward yet.  

Public  support  measures  during  the  crisis,  aimed  to  ensure  an  adequate  provision  of  financing, 
supported lending growth. The public guarantee scheme set up by the state has played an important role 
in  supporting  lending  during  the  crisis,  especially  to  SMEs,  and  preventing  corporate  bankruptcies. 
Accordingly,  bankruptcies  declined  in  2021  with  respect  to  both  2020  and  even  with  respect  to  pre-
pandemic  years.  Moreover,  non-performing  loans  remain  rather  stable  for  corporates  and  declined  for 
households.  The  macroprudential  measures  adopted  by  the  French  authorities  have  contributed  to 
ensuring  an  adequate  provision  of  credit  and  credit  standards  for  households’  loans  have  modestly 
improved.  

Recent reforms are set to improve cost-competitiveness and to support productivity. The permanent 
EUR 10 billion reduction in production tax (0.4% of 2019 GDP, or 0.7% of the value-added of NFCs), 
mainly targeted to the industry, is expected to support the country’s cost competitiveness. Reforms have 
also  been  introduced  to  improve  productivity  and  non-cost  competitiveness,  which  are  set  to  produce 
positive effects in the years to come. The PACTE law, which reforms firm size thresholds beyond which 
obligations  about  union’s  representation  and  organisational  aspects  are  set  and  encourage  incentive 
compensations,  was  adopted  in  May  2019.  Several  adjustments  were  brought  to  the  labour  market  in 
order  to  improve  its  efficiency  (e.g.  the  unemployment  benefit  reform  introduced  in  2021  or  the 
September 2017 labour law ordonnances - fully entered into force in 2018 - making open-ended contracts 
more  flexible  and  further  promoting  decentralised  bargaining).  Besides,  significant  productivity-
enhancing  investments  to  support  the  green  and  digital  transition  and  research  are  underway  and  are 
expected  to  continue  in  the  coming  years.  For  example,  the  Recovery  and  Resilience  Plan  aims  at 
fostering  innovation  in  digital  technologies,  with  projects  in  key  sectors  like  cybersecurity,  quantum 
technologies  or  cloud  financed  up  to  EUR  1.8  billions.  The  Plan  also  entails  investment  in  up-  and  re-

5 

2. Assessment of macroeconomic imbalances 

skilling the labour force (notably digital) in order to reduce the important skill mismatches in the labour 
market. By having a positive impact on productivity, these  reforms should also contribute to enhancing 
public debt sustainability. 

Conclusion 

France  is  facing  vulnerabilities  relating  to  high  public  debt,  as  well  as  competitiveness  challenges 
related to low productivity growth. The pandemic  hit crucial export sectors. The pandemic brought a 
sizeable increase in public debt, but with the return of growth in 2021, it edged down. Public debt is set to 
decline  further  over  the  period  to  2023,  but  will  remain  high  and  above  pre-pandemic  levels.  Fiscal 
sustainability risks have been aggravated during the pandemic, with high fiscal sustainability challenges 
in  the  medium-term.  While  private  sector  debt  surged  during  the  pandemic,  the  increase  in  corporate 
borrowing  came  hand  in  hand  with  increases  in  equity  and  the  accumulation  of  liquidity  buffers.  The 
current setting might facilitate a passive deleveraging, but risks to the overall economic outlook remain 
elevated.  Private  debt  stocks  compound  to  some  extent  the  risks  stemming  from  high  public  debt, 
reflected  in  a  deteriorating  net  international  investment  position.  Yet,  private  debt  levels  are  also  a 
consequence  of  the  successful  policy  measures  during  the  pandemic,  which  have  so  far  contributed  to 
stabilising  corporate  balance  sheets  and  maintaining  investment  levels  (see  next  chapter).  Together, 
growing public and private indebtedness have brought about a significant increase in external debt and a 
sizeable  deterioration  in  the  net  international  investment  position.  Exposures  to  energy  prices  are  of 
concern but unlikely to significantly affect macroeconomic vulnerabilities over the medium term (see box 
2.1).   

Recent  policy  measures  are  dampening  the  risks  associated  with  weak  competitiveness  and  high 
indebtedness.  Important  reforms,  such  as  the  substitution  of  the  tax  credit  on  competitiveness  and 
employment by an outright cut in social contributions, the EUR 10 billion cut in taxes on production and 
the  changes  to  the  labour  market  legislation  (notably  to  the  unemployment  benefit  system),  were 
introduced  in  recent  years  and  are  expected  to  produce  positive  effects  in  the  medium  term.  The 
implementation  of  these  reforms  and  of  the  planned  investments  will  be  key  to  address  the  persisting 
structural  competitiveness  challenges  and  the  slow  productivity  growth.  The  macroprudential  measures 
taken to address growing vulnerabilities, including in the residential real estate market are bearing fruit as 
credit standards have started to improve. A reform of public finances management entered into  force in 
2022,  and  an  evaluation  of  public  spending  is  planned,  to  identify  the  most  efficient  expenditures 
favouring growth, social inclusion and the green and digital transition. However, the implementation of 
this reform should be closely monitored in the future to ensure an effective contribution to improving the 
sustainability of public finances. The pension reform, aimed at unifying the currently existing 42 different 
regimes, was put on hold. Despite recent announcements of a pension reform, neither details, nor timeline 
has been provided. 

Based  on  the  findings  in  this  in-depth  review,  the  Communication  “European  Semester  –  2022 
Spring  Package” (6)  sets  out  the  Commission’s  assessment  as  to  the  existence  of  imbalances  or 
excessive imbalances in France, in line with Regulation 1176/2011. 

(6)  European Commission (2022), European Semester Spring Package 2022, COM(2022)600 final. 

6 

 
 
 
 
 
 
 
                                                           
2. Assessment of macroeconomic imbalances 

Box 2.1: 

Exposures to the commodity price surge, and to Russia 

This  box  summarizes  risks  and  exposures  regarding  the  commodity  price  surge,  and  the 
importance of direct links with the Russian economy. The surge of commodity prices since 2021 
had been aggravated by the Russian military aggression against Ukraine. This box reviews  the risks 
for  the  macroeconomic  vulnerabilities  in  France.  Available  data  suggests  that  exposures  to  energy 
prices  are  the  most  pressing  concern,  yet  are  unlikely  to  significantly  affect  macroeconomic 
vulnerabilities over the medium term. Although the sanctions imposed by the EU and its partners on 
Russia and Belarus will have side effects for the French economy, they seem limited compared to the 
rest of the EU. Economic links with Russia are relatively limited, and are likely to affect France rather 
via its impact on other Member States than directly.   

 Graph b.1.1: 

Sectoral distribution of energy use and of energy imported from Russia  

Notes: The left panel displays the distribution of primary energy usage in France according to Eurostat energy balances. The horizontal axis displays the 
relative importance of energy-consuming sectors. The vertical axis displays the importance of energy from Russia in satisfying that need. Note that this 
dependence on Russia differs according to sector’s use of natural gas vs oil and coal. For comparison, the right hand panels displays the same concept for 
the EU aggregate. Russian imports include oil and petroleum products, natural gas and solid fossil fuels. 
Sources: Eurostat and European Commission services calculations 
The French economy’s exposure to the energy price surge seems quite limited. Graph b.1.1 
shows  that imports from  Russia play a very limited role for energy  provision,  thus  the crisis is felt 
mainly through its impact  on  prices rather than through potential supply line disruption. Energy  is 
primarily used for transport, whereas the Energy and transformation sector uses comparatively less 
energy  than  in  the  rest  of  the  EU.  Overall,  the  reliance  on  nuclear  energy  means  that  the  overall 
economy is likely somewhat less affected by the commodity price surge than other Member States. (1) 
Moreover, the French economy consumes relatively little natural gas (See Table b.1.1), and so is less 
exposed  to  natural  gas  price  increases  than  the  rest  of  the  EU.  The  commodity  price  surge  is  still 
likely to have an impact on France: for instance, if fossil energy commodity imports remain at their 
typical  levels,  their  high  price  means  that  the  French  trade  balance  would  be  about  1  pp  of  GDP 
lower in 2022 than in 2021, with a significant carry-over to 2023.  

Table b.1.1:  

Selected exposures 

Notes: data source Eurostat for commodity exposures, European Commission Figaro for value-added exposures, BIS for consolidated banking exposures, 
European Commission FinFlows for other financial exposures. Energy gross inland consumption excludes net imports of electricity and derived heat. 
Most direct economic links between France and Russia are quite limited compared to the EU 
average.  Table  1  shows  that  exposure  of  the  French  economy  towards  Russia  is  generally  fairly 
insignificant, and are of  little importance to French value added. The key dependence relates to the 
8.8%  share  that  Russia  accounts  for  in  French  oil  imports.  However  disrupted  oil  imports  can  be 
more  easily  substituted  from  other  origin  countries  than  e.g.  natural  gas  imports.  While  financial 
exposures  towards  Russia  are  likewise  rather  small,  French  assets  in  Russia  concentrate  on  banking 
assets, notably the subsidiary of a major systemic bank, which seems broadly hedged against further 
losses in Russia (see Country Report).   

(1)  France  devoted  less  than  1  bn  EUR  annually  to  uranium  ore  imports  during  recent  years,  with  imports  from  Russia 

estimated to account for significantly less than 10% of total uranium ore imports.  

7 

Trade & financial exposuresunitFREUEnergy mixunitFREUDomestic value added embodied in exports to Russia% of GDP0.3%0.4%Solids fossil fuels (incl. peat)% of Gross inland Consumption 20202.3%10.8%Non-energy Russian import content in final demand% of GDP0.3%0.4%Oil and petroleum products% of Gross inland Consumption 202028.5%32.7%Russian tourist nights spent% of total 20191.5%2.7%Natural gas% of Gross inland Consumption 202015.3%24.4%FDI assets held in Russia% of 2020 GDP0.8%2.5%Renewables and waste% of Gross inland Consumption 202013.3%19.0%Portfolio & other inv. assets held in Russia% of 2020 GDP0.3%0.9%Nuclear% of Gross inland Consumption 202040.5%13.1%FDI liabilities towards Russia% of 2020 GDP0.0%1.2%Commodity exposuresunitFREUPortfolio & other inv. liabilities towards Russia% of 2020 GDP1.0%1.1%Net petroleum imports from all countries% of GDP 20211.2%1.2%Consolidated banking exposures towards Russia% of 2021 GDP0.9%0.5%Crude oil imports from Russia '20% of oil imports8.8%25.7%Net gas imports from all countries% of GDP 20210.6%0.6%Gas imports from Russia '20% of gas imports16.8%43.6% 
 
 
 
 
 
 
 
 
 
 
 
 
Table 2.1: 

Selected economic and financial indicators (Part 1), France 

2. Assessment of macroeconomic imbalances 

(e) estimate based on ECB quarterly data 
(1) Potential output is the highest level of production that an economy can reach without generating inflationary pressures. 
The methodology to compute the potential output is based on K. Havik, K. Mc Morrow, F. Orlandi, C. Planas, R. Raciborski, W. 
Roeger, A. Rossi, A. Thum-Thysen, V. Vandermeulen, The Production Function Methodology for Calculating Potential Growth 
Rates & Output Gaps, COM, European Economy, Economic Papers 535, November 2014. 
(2) Deviation of actual output from potential output as % of potential GDP. 
(3) Current accounts in line with fundamentals ("current account norms") are derived from reduced-form regressions 
capturing the main determinants of the saving-investment balance, including fundamental determinants, policy factors and 
global financial conditions. See L. Coutinho et al. (2018), "Methodologies for the assessment of current account benchmarks", 
European Economy, Discussion Paper 86/2018, for details.  
(4) This benchmark is defined as the average current account required to reach and stabilise the NIIP at -35% of GDP over the 
next 20 years. Calculations make use of Commission’s T+10 projections. 
(5) NENDI is a subset of the NIIP that abstracts from its pure equity-related components, i.e. foreign direct investment (FDI) 
equity and equity shares, and from intracompany cross-border FDI debt, and represents the NIIP excluding instruments that 
cannot be subject to default. 
(6) Fundamentals-based benchmarks are derived from regressions capturing the main determinants of credit growth and 
taking into account a given initial stock of debt. Prudential thresholds represent the debt threshold beyond which the 
probability of a banking crisis is relatively high, minimising the probability of missed crisis and that of false alerts. Methodology 
to compute the fundamentals-based and the prudential benchmarks based on Bricongne, J. C., Coutinho, L., Turrini, A., 
Zeugner, S. (2019), “Is Private Debt Excessive?”, Open Economies Review, 1- 42. 
Source: Eurostat and ECB as of 2-5-2022, where available; European Commission for forecast figures (Spring forecast 2022) 

8 

all variables y-o-y % change unless otherwise stated2003-072008-122013-17201820192020202120222023Real GDP 2.00.41.21.91.8-7.97.03.11.8Potential growth  (1)1.81.20.90.90.90.91.21.41.4Contribution to GDP growth:Domestic demand 2.30.51.31.52.1-6.56.72.71.9Inventories 0.1-0.10.20.00.0-0.20.00.1-0.4Net exports -0.40.0-0.30.4-0.3-1.10.20.30.3Contribution to potential GDP growth (1):Total Labour (hours) 0.50.40.20.20.20.40.50.60.6Capital accumulation 0.70.60.50.50.60.30.60.60.6Total factor productivity 0.60.30.20.20.20.10.10.20.2Output gap (2)1.6-1.1-1.41.01.9-7.0-1.70.00.4Unemployment rate8.69.010.19.08.48.07.97.67.6Harmonised index of consumer prices (HICP)2.01.90.62.11.30.52.14.93.1GDP deflator 2.11.10.71.01.32.50.82.23.0External positionCurrent account balance (% of GDP), balance of payments0.3-0.7-0.6-0.8-0.3-1.9-0.6-1.1-0.1Trade balance (% of GDP), balance of payments0.4-1.3-0.7-1.1-0.9-1.9-1.2..Primary income balance (% of GDP)1.72.42.12.32.51.92.2..Secondary income balance (% of GDP)-1.8-1.8-2.1-2.0-1.9-1.9-1.6..Current account explained by fundamentals (CA norm, % of GDP) (3)0.10.80.91.01.01.00.60.60.5Required current account to stabilise NIIP above -35% of GDP over 20Y (% of GDP) (4)0.0-0.2-0.6-0.9-0.9-1.2-1.6-1.5-1.5Capital account balance (% of GDP)-0.10.00.00.10.10.10.5..Net international investment position (% of GDP)-4.4-11.9-15.6-19.3-25.3-30.2-34.5..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (5)-6.4-23.8-30.3-34.1-34.8-41.9-40.6..Net FDI flows (% of GDP)1.51.50.70.00.61.21.62.21.8CompetitivenessUnit labour costs (ULC, whole economy)1.52.10.80.8-0.74.4-0.21.81.9Nominal compensation per employee 3.02.31.41.70.0-2.94.93.83.3Labour productivity (real, hours worked)0.90.21.10.40.40.4-0.8-1.21.0Real effective exchange rate (ULC)0.6-0.30.10.4-4.6....Real effective exchange rate (HICP)0.0-1.2-0.22.6-1.41.5-0.4..Export performance vs. advanced countries (% change over 5 years)-4.3-9.3-4.6-1.7-2.1-6.4...Private sector debtPrivate sector debt, consolidated (% of GDP)109.5131.7142.0148.4152.6173.6167.9..Household debt, consolidated (% of GDP)41.753.056.660.462.268.767.0..Household  debt, fundamental benchmark (% of GDP) (6)46.855.057.757.256.961.558.6..Household  debt, prudential threshold (% of GDP) (6)41.340.345.547.849.048.949.1..Non-financial corporate debt, consolidated (% of GDP)67.778.885.488.090.4105.0100.9..Corporate debt, fundamental benchmark (% of GDP) (6)60.565.070.070.670.276.072.5..Corporate debt, prudential threshold (% of GDP) (6)44.646.253.652.953.654.054.2..Private credit flow, consolidated (% of GDP) 7.75.64.68.27.912.96.5..Corporations, net lending (+) or net borrowing (-) (% of GDP)1.10.90.0-1.0-0.4-1.4-0.2-0.8-0.8Households, net lending (+) or net borrowing (-) (% of GDP)2.43.72.82.62.88.05.63.73.1Net savings rate of households (% of net disposable income)9.210.08.58.79.215.7...forecast 
 
 
 
 
 
 
 
   
 
Table 2.2: 

Selected economic and financial indicators (Part 2), France 

2. Assessment of macroeconomic imbalances 

(7) Unweighted average of price-to-income, price-to-rent and model valuation gaps. The model valuation gap is estimated 
in a cointegration framework using a system of five fundamental variables; total population, real housing stock, real 
disposable income per capita, real long-term interest rate and price deflator of final consumption expenditure, based on 
Philiponnet, N., Turrini, A. (2017), "Assessing House Price Developments in the EU," European Economy - Discussion Papers 2015 - 
048, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission. Price-to-income and price-to-
rent gaps are measured as the deviation to the long term average (from 1995 to the latest available year). 
(8) Price-to-income overvaluation gap measured as the deviation to the long term average (from 1995 to the latest available 
year). 
(9) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
Source: Eurostat and ECB as of 2022-05-02, where available; European Commission for forecast figures (Spring forecast 2022) 

9 

all variables y-o-y % change unless otherwise stated2003-072008-122013-17201820192020202120222023Housing marketHouse price index, nominal11.90.8-0.12.93.35.26.3..House price index, deflated9.8-0.3-0.51.22.54.44.6..Overvaluation gap (%) (7)8.215.36.98.410.715.120.5..Price-to-income overvaluation gap  (%) (8)6.314.611.510.911.316.220.3..Residential investment (% of GDP)6.16.46.16.36.56.16.8..Government debtGeneral government balance (% of GDP)-3.2-5.5-3.6-2.3-3.1-8.9-6.5-4.6-3.2General government gross debt (% of GDP)65.483.196.097.897.4114.6112.9111.2109.1Banking sectorReturn on equity (%)9.54.86.06.76.44.5...Common Equity Tier 1 ratio.10.714.115.516.117.0...Gross non-performing debt (% of total debt instruments and total loans and advances) (9)2.64.23.52.52.22.0...Gross non-performing loans (% of gross loans) (9)..3.72.72.52.22.0..Cost of borrowing for corporations (%)4.03.11.81.51.41.21.3..Cost of borrowing for households for house purchase (%)4.14.02.21.51.21.21.1..forecast 
 
 
   
 
3.  THEMATIC CHAPTER: PRIVATE INDEBTEDNESS 

The  private  debt-to-GDP  ratio  increased  steadily  between  2000  and  2019. This  increase  was  partly 
due to the  low interest rates that allowed for the decline  in the interest burden for both households and 
non-financial corporations (Graph 3.1(a)). Private credit growth expanded by more than 10% on average 
between  2017  and  the  end  of  2019  (see  Graph  3.1(b)).  The  brisk  increase  in  private  indebtedness,  by 
some 20 pps. of GDP, in 2020 resulting mainly from the contraction in economic activity will take some 
years  to  be  absorbed.  Despite  the  sound  expansion  in  economic  activity  in  2021,  when  nominal  GDP 
increased  by  an  estimated  7.8%,  the  private  debt  ratio  remained  stable  as  credit  flows  remained  very 
dynamic (see Table 3.1).  

The sharp increase in private as well as public debt contributed to a significant deterioration of the 
external position. While still within the scoreboard thresholds, the Net International Investment position 
(NIIP) declined from -8.9% of GDP in 2007 to -30.2% in 2020, with gross external debt reaching 50% of 
GDP in 2020. Valuation effects contributed significantly to the deterioration of the NIIP since 2007. In 
contrast, in national accounts terms, the current account balance has been only slightly negative after the 
financial  crisis  (-0.8%  of  GDP  on  average  over  the  period  2013-2019).  Although  it  deteriorated 
significantly  in  2020  to  -2.6%  of  GDP,  it  is  set  to  largely  recover  after  the  negative  shock  of  the 
pandemic.      

Graph 3.1: 

Private indebtedness 

Source: Eurostat 

Household indebtedness 

Household  indebtedness  remains  fuelled  by  dynamic  credit  flows.  The  upward  trend  of  household 
debt  as  a  percentage  of  GDP  since  the  early  2000s  was  accentuated  by  the  outbreak  of  the  COVID-19 
pandemic.  After  reaching  62.1%  of  GDP  in  2019,  household  indebtedness  peaked  at  68.7%  in  2020. 
Despite the strong economic rebound in 2021, the households’ debt ratio declined by only two percentage 
points  (see  Graph  3.2(a))  as  nominal  debt  continued  to  increase.  As  a  percentage  of  gross  disposable 
income  household debt remained on the rise too and is set to have reached 103% in 2021. This upward 
trend  in  their  leverage  remains  fuelled  by  dynamic  credit  flows  (see  Graph  3.2(b)),  mainly  loans  for 
housing investment, which gained momentum in 2021. Such regained dynamism of housing lending can 
be partly explained by the sizeable accumulation of savings during the crisis and the continued increase in 

10 

 
  
3. Thematic chapter: Private Indebtedness 

house prices,  with new lending now above its pre-crisis level, and very favourable financing conditions 
with interest rates at historic lows.  

Household  debt  remained  broadly  stable  when  compared  with  financial  assets,  but  its  increase 
raises  concerns  as  it  departs  from  fundamentals.  The  debt-to-financial  assets  ratio  has  remained 
broadly stable around 25.5% over the last decade. In turn, the households’ interest burden as a share of 
their  gross  disposable  income  decreased  to  historical  lows,  in  line  with  other  euro  area  countries. 
However, the share of households’ income devoted to debt repayment continued to rise as a result of an 
increasing leverage. In its February 2022 report, the European Systemic Risk Board (ESRB) shows that 
France is one of the few countries where the debt service ratio has increased between 2019 and 2021. The 
increase of the debt service ratio represents a particular risk in case of negative shocks to employment or 
interest  rate  increases.  In  this  context,  the  household  debt-to-GDP  ratio  has  been  departing  from  its 
fundamentals  since  2018,  and  the  gap  with  respect  to  prudential  thresholds,  as  estimated  by  the 
Commission, keeps widening (Graph 3.2(c)). In spite of all these concerns, the share of non-performing 
loans keeps falling steadily (see Graph 3.3(c) below).  

Graph 3.2:  Household debt 

Source: European Commission services and Eurostat. 

Some signs of overvaluation in the housing market persist, but there are also important mitigating 
factors. Dynamic demand for housing and relatively easy access to credit keep fuelling an acceleration of 
prices.  Commission  services  calculations  suggest  a  potential  overvaluation  of  housing  prices  between 
12%  and  30%  (see  Graph  3.2(d)),  which  highlights  risks  in  the  residential  real  estate  sector.  However, 
these  risks  are  mitigated  by  two  main  factors.  First,  interest  rate  risks  are  limited  by  the  fact  that 

11 

-30-20-100102030400103050709111315171921% deviation of current price(d) Housing overvaluation gaps in FranceModel-based valuations gapPrice to income vs. hist. avg.Price to rent vs. hist. avg.Overall valuation gapsource:commission services calculations-15.0-10.0-5.00.05.010.015.020.025.0990103050709111315171921percentage points of GDP(c ) Gap to fundamental-based and prudential benchmarksHouseholds debt gap to fundamentals-based benchmark, ppsHouseholds debt gap to prudential benchmark, ppssource:Eurostat and European Commission -6-4-202468100809101112131415161718192021y-o-y change(b) Drivers of household indebtednessCredit flowReal growthInflationOther changesD/GDP, changesource:Eurostat02040608010012001020304050607080050709111315171921*% GDI% of GDP and assets(a) Household indebtednessDebt / GDP, HouseholdsDebt / fin. assets, HouseholdsDebt / gross disposable income, Households (right axis)source:Eurostat  
3. Thematic chapter: Private Indebtedness 

outstanding loans are almost entirely at fixed rates (above 99%). Second, the double-selection procedure 
of borrowers for most housing loans (evaluated by lenders as well as mutual guarantee companies) makes 
the value of the collateral less crucial in the event of sharp housing price declines. In addition, the French 
authorities have taken several macroprudential measures to address the growing vulnerabilities, including 
in  the  residential  real  estate  market,  mainly  by  regulating  debt-service  to  income  ratios  and  loan 
maturities.  

Macroprudential measures are bearing fruit and credit standards have started to improve, even as 
housing  loans  rose.  In  parallel  to  the  rise  in  housing  loans,  credit  standards  declined  continuously 
between 2016 and 2019, with increasing maturities, loan-to-value and debt service-to-income ratios (Haut 
Conseil de Stabilité Financière, HCSF, 2019a and 2019b). Following the warning issued by the European 
Systemic Risk Board (ESRB) on 23 September 2019, the HCSF issued a recommendation in December 
2019  requiring  credit  institutions  to  respect  best  practices  when  granting  housing  loans,  especially 
regarding debt-service-to-income ratios and loan maturities. (7) In December 2020, the HCSF decided to 
strengthen some of the terms of the recommendation and in September 2021, the HCSF decided to make 
the  terms  of  the  recommendation  legally  binding  as  of  1  January  2022. (8)  As  a  result  of  these 
announcements,  the  share  of  loans  with  high  debt-service-to-income  ratios  or  long  maturities  started  to 
fall without having any visible impact on new mortgages. (9) The February 2022 ESRB report concluded 
that  the  current  policy  mix  in  France  is  appropriate  and  sufficient,  with  the  borrower-based  measures 
assessed as appropriate and sufficient to address risk related to mortgage lending growth, loose lending 
standards  and  rising  house  prices.  The  report  recommends  banks  to  rebuild  capital  buffers  once  the 
economic recovery is on solid ground. Given the relatively low internal ratings-based (IRB) risk weights 
for  mortgage  exposures,  the  ESRB  also  recommends  increasing  these  risk  weights  if  the  associated 
vulnerabilities increase further, along with rebuilding the counter cyclical buffers (CCyB) or replacing it 
with  a  sectoral  systemic  risk  buffers  (SyRB)  in  order  to  strengthen  resilience  against  the  potential 
materialisation of housing market-related risks. In response to that, on 24 March the HCSF has increased 
its CCyB from 0% to 0.5%. (10) 

Non-financial corporations’ indebtedness 

Non-financial corporation indebtedness remains high and credit flows dynamic. The fall in interest 
rates  and  the  reduction  of  intermediation  margins  in  the  French  banking  sector  in  recent  years  led 
financial  institutions  to  expand  their  balance  sheets  to  safeguard  their  profitability.  This  supported  a 
steady increase in corporate indebtedness that reached 90% of GDP in consolidated terms in 2019. The 
contraction  in  GDP  following  the  outbreak  of  the  COVID-19  pandemic  and  the  sizeable  envelope  of 
state-guaranteed loans, worth EUR 300 billion, deployed to avert liquidity shortages and bankruptcies led 
to a further increase in the corporate debt to GDP ratio, by around 15 pps., in 2020. There is a risk that the 
pandemic  has  left  a  protracted  legacy  in  terms  of  corporate  debt  overhang.  The  economic  rebound  in 
2021, with real GDP expanding by 7.0%, helped reduce the corporate consolidated debt-to-GDP ratio by 
only 4 pps., while new credit kept expanding at pre-pandemic pace, at around 3.5% of GDP.  

The gap between non-financial corporate debt and its fundamental and prudential thresholds keeps 
widening. According to Commission estimates, the gap of non-financial corporate indebtedness vis-à-vis 
its fundamental values widened during the COVID-19 pandemic to some 28 percentage points of GDP. In 
turn, when compared with the level of corporate indebtedness beyond which the risk of a banking crisis is 
comparatively high, this gap rose to above 50 percentage points (see Graph 3.3(a)). However, the upward 
trend  in  corporate  leverage  remains  accompanied  by  a  continuous  decline  in  its  debt  service,  which  is 

(7)  On  12  December  2019,  the  High  Council  for  Financial  Stability  (HCFS)  activated  a  non-binding  borrower-based  measure 
consisting in a debt-service to income ratio limit of 33% combined with a cap of 25 years on the initial maturity of the loan, 
with a margin of tolerance of 15%. On 27 January 2021 the HCSF amended the Recommendation (Haut Conseil de Stabilité 
Financière, 2021), raising the benchmark ceiling for the debt service-to-income ratio from 33% to 35%. In turn, the flexibility 
margin  for  the  share  of new  loans  that can  diverge  from  best  practices in  terms  of  maturity  and debt  service-to-income  ratio 
increased from 15% to 20% of the volume of total new loans. As part of the increase in the margin and in order to ensure that it 
benefits mainly households purchasing their main residence, the share reserved for the purchase of the main residence will be 
increased  from  75%  to  80%  of  the  maximum  flexibility  margin  and  a  share  of  30%  of  the  maximum  flexibility  margin  is 
specifically reserved for first-time buyers. 

(8)  See Haut Conseil de Stabilité Financière (2021a), Communiqué de presse. 29/09/2021.   
(9)  See Haut Conseil de Stabilité Financière (2021b), Rapport annuel 2021. 
(10)  See Haut Conseil de Stabilité Financière (2022), Communiqué de presse. 24/03/2022.   

12 

                                                           
3. Thematic chapter: Private Indebtedness 

estimated to have reduced further, to below 5% of total value added by the end of 2021 due to historically 
low interest rates (recall Graph 3.1(b)).  

Corporate indebtedness was accompanied by an even faster increase in equity and financial assets. 
In the 2010s, the increase in corporate debt was mainly driven by large companies that also accumulated 
higher  liquidity  buffers  (cf.  European  commission,  In-depth  review  2021).  Accordingly,  total  liabilities 
compared  to  total  financial  assets  or  to  equity  have  shown  a  downward  trend  since  2011  (see  Graph 
3.3(b)). The COVID-19 pandemic does not seem to have reverted this trend. After a small uptick in 2020, 
debt-to-equity and debt-to-financial assets ratios declined again in 2021, falling below the levels observed 
in 2019. This also results from the firms’ accumulation of sizeable liquidity buffers, and thus an apparent 
strengthening of corporate balance sheets.  

The  support  measures  to  assuage  the  effects  of  the  COVID-19  pandemic  helped  to  alleviate  the 
financial  impact  of  the  crisis  on  firms.  A  study  of  company  balance  sheets  for  2020  shows  that  only 
14%  of  companies  increased  their  debt  and  diminished  their  cash  flow  between  2019  and  2020 (11).  In 
addition,  Banque  de  France (12)  finds  that  the  distribution  of  net  bank  debt  of  very  small  enterprises 
(VSEs) and SMEs improved between December 2019 and September 2021. In particular, the proportion 
of  firms  with  negative  net  debt  increased  while  the  proportion  of  enterprises  with  positive  net  debt 
decreased.  This  is  consistent  with  the  signals  sent  by  companies  in  business  surveys.  In  January  2022, 
65% of SMEs considered their cash flow sufficient in view of the crisis (versus 63% last May and 53% 
one year ago) and only 1.5% declared to be facing insurmountable difficulties. Regarding the use of state-
guaranteed  loans,  52%  of  SMEs  declared  that  they  have  spent  little  of  it  (22%)  or  indeed  none  (30%) 
thereof,  while  37%  will  have  repaid  their  loans,  at  least  partially,  by  the  end  of  2021.  Only  5%  of  the 
respondents  in  the  survey  feared  not  to  be  able  to  repay  their  loans  (cf.  74th  half-yearly  SME  business 
climate  survey,  BPI  France,  January  2022).  The  overall  take-up  rate  of  these  state-guaranteed  loans 
reached 47% at the end of December 2021. Finally, a large micro-simulation exercise (13) comparing the 
financial situation of firms before and after support measures implemented by the government during the 
pandemic  found  the  support  measures  have  significantly  mitigated  the  overall  magnitude  and 
heterogeneity  of  the  shock  among  firms.  Taking  into  account  the  measures,  only  around  half  of  the 
observed companies suffered from a negative liquidity shock in 2020, the same proportion as in 2018.  

However,  the  financial  situation  of  a  small  proportion  of  companies  deteriorated  significantly. 
Banque  de  France  estimates  that  approximately  7%  of  the  companies  experienced  debt  increases  along 
with  parallel  cash  flow  decreases,  while  not  being  identified  in  difficulty  before  the  crisis.  The  above-
mentioned  micro-simulation exercise also shows that the  share  of  firms that suffered from a significant 
negative  shock  has  increased.  While  this  has  not  yet  led  to  an  increase  in  NPLs,  these  firms,  which 
represent  a  small  but  significant  share  of  the  undertakings,  may  require  specific  support,  in  particular 
during  the  first  repayment  instalments  of  state-guaranteed  loans.  The  authorities  have  put  in  place  a 
dedicated  tool  (‘Plan  d’action  sur  l’accompagnement  des  entreprises  en  sortie  de  crise’)  aiming  at 
identifying companies at risk as soon as possible and offering them tailored solutions. 

Despite the moratoria in 2020, corporate bankruptcies decreased by 12.7% in 2021 with respect to 
the previous year. The decrease was observed in most firm size categories and sectors, including those 
hardest  hit  by  restrictions  resulting  from  the  health  situation,  among  which  accommodation  and  food 
service activities. When compared to 2019, before the outbreak of the COVID-19 pandemic, the decrease 
in  the  number  of  bankruptcies  cumulated  over  2021  amounted  to  46.6%.  According  to  Banque 
de France (14), there is no sign at this stage of a resurgence of bankruptcies or of a wave of insolvencies in 
the  future.  However,  this  evolution  will  have  to  be  monitored  in  a  context  of  gradual  withdrawal  of 
support measures.  

There are several negative post-pandemic risks for both non-financial and financial corporations. 
First,  given  the  amount  of  gross  indebtedness,  a  quick  and  abrupt  increase  in  interest  rates  could 
significantly  impact  the  financial  burden  of  firms.  Besides,  the  financial  sector  could  be  exposed  to  a 

(11)  Banque de France (June 2021), L’impact différencié de la crise sur la situation financière des entreprises, Bloc-note éco 219. 
(12)  L’impact de la crise du Covid-19 sur la situation financière des entreprises et des ménages, à fin octobre 2021 (Octobre 2021). 
(13)  See Banque de France, Working Paper 84 (July 2021), What Individual Data tells us about the Covid-19 Impact on Corporate 

Liquidity in 2020 

(14)  Banque de France (2021a). Business failures, December 2021. 

13 

                                                           
3. Thematic chapter: Private Indebtedness 

negative  and  durable  shock  on  the  activity  of  the  real  estate  sector  (in  particular  the  commercial  one, 
weakened  by  the  development  of  teleworking  and  online  purchases).  When  compared  to  other  EU 
countries, the banking sector in France is indeed relatively more exposed to the real estate sector, which 
accounts for some 50% of total loans to non-financial corporations. However, as a mitigating factor, loans 
to these corporations as a percentage of banks’ assets are actually lower or broadly in line with most other 
EU countries. Moreover, when focusing on the  commercial real estate (CRE), the situation is relatively 
more  favourable  in  France:  the  total  exposure  collateralized  by  immovable  commercial  property 
amounted to 2.1% of the assets (against 3.5% in the EU).  

The  COVID-19  outbreak  led  the  French  authorities  to  relax  one  of  the  two  macroprudential 
measures  taken  in  2019  to  address  vulnerabilities  stemming  from  high  corporate  indebtedness. 
After  its  decision  in  April  2019  to raise  the  counter-cyclical  capital  buffer  (CCyB)  rate  for  banks  from 
0.25%  to  0.5%  of  the  total  risk  amount,  the  HCSF  decided  in  January  2020  to  lower  the  maximum 
exposure  of  systemic  banks  to  ‘high-indebted’  enterprises  from  25%  to  5%  of  its  equity.  This  measure 
originally aimed to preserve the resilience of the credit institutions vis-à-vis potential defaults of highly 
indebted private  non-financial corporations. However, the  outbreak of  the  COVID-19 pandemic led the 
HCFS to relax some requirements in order to allow banks to  maintain their credit supply, especially to 
small and medium sized enterprises that are the most dependent on bank financing. Moreover, as of April 
2020,  the  HCSF  decided  to  lower  the  countercyclical  capital  buffer  to  0%. (15)  While  this  level  was 
confirmed in January 2022, in response to recent ESRB recommendations, on 24 March the HCSF has 
increased  its  CCyB  from  0%  to  0.5% .  The  HCSF  also  recommended  banks  and  insurers  to  behave 
responsibly regarding dividend distribution, share buybacks, and variable pay.  

(15)  Haut Conseil de Stabilité Financière (2020), Communiqué de presse. 1/04/2020.   

14 

                                                           
Graph 3.3:  Non-financial corporate debt 

3. Thematic chapter: Private Indebtedness 

Source: European Commission services, ECB and Eurostat 

Despite  some  vulnerabilities,  the  financial  sector  remains  resilient  and  financing  conditions 
continue  to  be  favourable.  The  continued  economic  recovery  has  mitigated  short-term  risks  for  the 
financial  sector,  in  particular  in  view  of  the  stabilisation  of  corporate  conditions.  The  banking  sector’s 
solvency  has  remained  solid  over  2021.  The  economic  recovery  has  reduced  the  cost  of  risk  and 
provisions  have  been  withdrawn,  thereby  boosting  banks’  profits  and  pushing  up  their  stock  prices.  In 
turn, after a very  limited increase  in the  second quarter of 2020,  non-performing loans of non-financial 
institutions  have  remained  constant  (see  Graph  3.3(c)).  Overall,  financial  conditions  remain  very 
favourable both in terms of volume and price. Bank credit growth remains dynamic at low interest rates, 
while  bond  spreads  vis-à-vis  the  safest  securities  remain  at  historically  low  levels.  However,  some 
vulnerabilities  exist:  credit  institutions’  market  valuations  remain  significantly  below  their  book  value, 
highlighting  the  structural  challenges  of  profitability  linked  to  the  low  interest  rate  environment  and 
digital transformation. Moreover, while inflation expectations are still well anchored, a protracted rise in 
inflation  would  lead  to  higher  market  interest  rates  that  would  deteriorate  financial  conditions. (16) 
Finally, renewed lockdowns in China and the  war in Ukraine  might  weigh on the  financial situation of 
firms  and  lead  to  an  increase  in  non-performing  loans,  which  might  also  call  for  additional  support 
measures.  

In  spite  of  having  weathered  the  crisis  well,  the  high  indebtedness  of  non-financial  corporations 
could weigh on medium-term growth prospects. France has gradually adapted support measures to the 

(16)  See Banque de France (2021b). Évaluation des risques du système financier français, December 2021. 

15 

   
                                                           
Table 3.1: 

Private debt indicators, France 

3. Thematic chapter: Private Indebtedness 

(f) European Commission forecast, . (1) Quarterly data is non-consolidated. (2) Gross non-performing bank loans and 
advances to Households and non profit institutions serving households (% of total gross bank loans and advances to 
Households and non profit institutions serving households). (3) Gross non-performing bank loans and advances to Non-
financial corporations (% of total gross bank loans and advances to Non-financial corporations). (4) Quarterly data is 
annualized. 
Source: (a) Eurostat, (b) Ameco, (c) European Commission calculations, (d) ECB. 

economic  situation.  While  most  of  them  have  been  phased  out  over  the  second  half  of  2021,  it  has 
extended the timeframe for State-guaranteed loans, especially for SMEs, until 30 June 2022. So far, the 
timing  for  the  withdrawal  of  support  measures  seems  to  have  been  accurate.  Bankruptcies  over  2021 
remained  low  compared  to  pre-crisis  years  and  no  significant  wave  of  insolvencies  is  expected. 
Nevertheless,  excessive  indebtedness  may  limit  firms’  ability  to  undertake  investment  projects  and 
ultimately put a lid on productivity growth. 

16 

2003-072008-122013-18201920202021f|21Q121Q221Q321Q4SourceStocksPrivate debt level (% of GDP)(1)(a,d)109132143153174168|241235235234Private debt level (% of potential GDP)(1)(a,b,d)111130142155162165|225226229230Prudential threshold (% of GDP)(c)878699103103103|Fundamental benchmark (% of GDP)(c)107120128127138131|FlowsPrivate credit flows (transactions, % of GDP)(4)(a)7.75.65.27.912.96.5|7.110.110.511.3Private credit flows (transactions, % of potential GDP)(4)(a,b)7.95.65.28.112.06.4|6.69.810.311.2Benchmark for flows (% of GDP)(c)|Households (HH)StocksHH debt level (% of GDP)(a,d)425357626967|69676767HH debt level (% of potential GDP)(a,b,d)425257636466|64656566Prudential threshold (% of GDP)(c)424046494949|Fundamental benchmark (% of GDP)(c)465558576259|Debt (% of gross disposable income)(a,b,d)66829199102103|102103103103Interest paid (% of gross disposable income)(a,b)2.02.21.21.00.8|0.80.80.7Debt (% of gross financial assets)(a,d)22.126.625.525.825.625.3|25.225.125.325.2Share of variable rate loans for house purchase (%)(d)25.410.53.82.42.32.5|Domestic  loans in forex (% of dom. loans)(d)0.91.51.71.31.21.1|FlowsHH credit flows (transactions, % of GDP)(4)(a)3.92.32.13.73.03.5|1.84.94.03.7HH credit flows (transactions, % of potential GDP)(4)(a,b)3.92.32.13.82.83.4|1.74.73.93.6Benchmark for flows (% of GDP)(c)3.12.51.21.41.31.3|Savings rate (% gross disposable income)(b)14.115.313.914.721.019.1|Investment rate (% gross disposable income)(b)10.49.79.39.78.710.0|p.m. Bank HH NPLs (% of HH loans)(2)(d)3.9|Non-financial corporations (NFC)StocksNFC debt (% of GDP)(1)(a,d)68798690105101|173168168167NFC debt (% of potential GDP)(1)(a,b,d)697885929899|161162163164Prudential threshold (% of GDP)(c)454653545454|Fundamental benchmark (% of GDP)(c)616570707673|Debt (% of value added)(a,b,d)123143155161193181|312307304300Interest paid (% of gross operating surplus)(a,b)25.525.317.514.014.5|14.514.314.0Debt (% of gross financial assets)(a,d)606960565853|Domestic  loans in forex (% dom. Loans)(d)2.42.81.61.41.21.2|1.31.21.21.2FlowsNFC credit flows (transactions, % of GDP)(4)(a)3.93.43.24.29.83.0|5.35.36.57.7NFC credit flows (transactions, % of potential GDP)(4)(a,b)3.93.43.24.39.22.9|4.95.16.37.6Benchmark for flows (% of GDP)(c)|Investment (% of value added)(b)21.922.324.526.125.927.2|Savings (% of value added)(b)23.022.222.323.721.124.0|p.m. Banks NFC NPLs (% of NFC loans)(3)(d)5.53.93.9|Total private sector (Households and Non-financial corporations)