COMMISSION STAFF WORKING DOCUMENT In-depth review for France 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 2023 European Semester – Spring Package
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: European Semester, France, competitiveness, economic policy, economic recovery, energy policy, indebtedness, macroeconomics, pension scheme

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2023  SWD(2023) 633 final  COMMISSION STAFF WORKING DOCUMENT In-depth review for France 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 2023 European Semester – Spring Package {COM(2023) 600 final} - {SWD(2023) 628 final} - {SWD(2023) 629 final} - {SWD(2023) 630 final} - {SWD(2023) 631 final} - {SWD(2023) 632 final} - {SWD(2023) 634 final} - {SWD(2023) 635 final} - {SWD(2023) 636 final} - {SWD(2023) 637 final} - {SWD(2023) 638 final} - {SWD(2023) 639 final} - {SWD(2023) 640 final} - {SWD(2023) 641 final} - {SWD(2023) 642 final} - {SWD(2023) 643 final} - {SWD(2023) 644 final}  
 
 
France 

In-Depth Review 2023 

 
 
 
 
 
 
 
 
 
 
 
 
On  the  basis  of  this  in-depth  review  for  France  undertaken  under 
Regulation  (EU)  No  1176/2011  on  the  prevention  and  correction  of 
its 
in 
macroeconomic 
Communication 
Package” 
(COM(2023)600 final) that: 

imbalances,  the  Commission  has  considered 
“European  Semester 

–  2023  Spring 

imbalances.  Vulnerabilities  related  to  high 
France  continues  to  experience 
government  debt,  and  competitiveness  and  low  productivity  growth,  which  have 
cross-border  relevance,  remain  present  but  have  shown  signs  of  reduction. 
Government debt has been declining since the rebound in GDP in 2021, following an 
increase  during  the  pandemic.  In  2022,  various  fiscal  measures  significantly 
mitigated the impact of the energy crisis but slowed debt reduction. Debt is forecast 
to  further  decline  this  year  and  next,  but  it  is  projected  to  enter  an  upward  trend 
again  thereafter  in  the  absence  of  policy  action,  remaining  high  and  above  pre-
pandemic  levels,  and  medium-term  fiscal  sustainability  challenges  remain  high. 
Policy measures  taken in recent  years  aiming  at  enhancing  potential  growth might 
help  correct  the  projected  increase  in  public  debt  in  the  medium  term.  Several 
reforms have been adopted to boost cost competitiveness. A small positive effect on 
competitiveness  is  already  visible,  and  their  full  impact  is  expected  to  materialise 
over the coming years. Likewise, labour productivity is expected to benefit from the 
effective implementation of planned investments and reforms. The French economy 
displayed resilience over the last year, as cost competitiveness was less affected by 
increases  in  energy prices  than  in  the  rest  of  the euro  area.  Exports  are  improving 
owing  to  the  further  recovery  of  cross-border  tourism  and  the  aircraft  industry, 
which  were  much  affected  by  the  pandemic.  While  private  sector  debt  increased 
during  the  worst  of  the  pandemic,  higher  corporate  borrowing  went  hand  in  hand 
with increases in equity  and accumulation of liquidity  buffers. Higher interest rates 
may  make  public  and  private  deleveraging  more  difficult.  The  policy  response  has 
been  favourable,  but  there  remain  challenges,  centred  on  public  finance 
management.  An  effective  implementation  of  recently  adopted  reforms  remains 
central  to  further  reduce  vulnerabilities,  namely  the  reform  of  public  finances 
management  and  the  new  mechanism  to  conduct  annual  public  spending 
evaluations. Both actions are crucial to continue to curb expenditure and keep public 
debt  on  a  sustained  downward  trend.  Moreover,  the  government  has  adopted  a 
reform  of  the  public  pension  system  that  is  expected  to  help  public  debt 
sustainability. 

 
 
 
 
 
 
CONTENTS 

1.  Introduction 

2.  Assessment of macroeconomic vulnerabilities 

LIST OF TABLES 

Table 2.1: 
Table 2.2: 

Selected economic and financial indicators (Part 1), France 
Selected economic and financial indicators (Part 2), France 

LIST OF GRAPHS 

Graph 2.1:  Selected graphs, France 

Graph 2.2:  Components of gross fixed capital formation deflator growth and consumer price inflation 

Graph 2.3: 

Impact of French value added inflations on EU partners’ consumer price inflation 

4 

5 

15 
16 

12 

13 

14 

 
 
 
 
 
 
 
1. 

INTRODUCTION 

In  2022,  over  the  previous  annual  cycle  of  surveillance  under  the  Macroeconomic 
Imbalance  Procedure  (MIP),  the  Commission  identified  “macroeconomic  imbalances”  in 
France. (1)  These  imbalances  were  related  to  high  government  debt  and  weak  competitiveness, 
which  carry  cross-border  relevance,  in  a  context  of  low  productivity  growth.  The  2023  Alert 
Mechanism Report published in November 2022 concluded that an in-depth review (IDR) should be 
undertaken  also  this  year  for  France  with  a  view  to  assess  the  persistence  or  unwinding  of 
imbalances. (2)  The  AMR  found  that  concerns  related  to  cost  competitiveness  and  the  high 
government debt-to-GDP ratio remained. In addition, high private debt warranted close monitoring. 
Core  inflation  was  lower  than  in  many  other  euro  area  countries.  Nonetheless,  external 
sustainability and competitiveness concerns continued to warrant close monitoring. Albeit declining, 
the government debt-to-GDP ratio and government deficit remained high. Non-financial corporate 
debt was on a declining path following a sharp increase during the pandemic. 

The  French  economy  slowed  down  in  2022  and  growth  is  expected  to  remain  subdued 
over  2023,  reflecting  higher  production  costs  and  the  uncertainties  related  to  the 
evolution  of  prices. (3)  The  economic  recovery  from  the  COVID-19  crisis  lost  steam  due  to  the 
continued  disruption  in  supply  chains  and  the  surge  in  energy  prices,  with  Russia’s  invasion  of 
Ukraine placing a further drag on the economy. France thus experienced a slowdown in GDP growth 
to 2.6% in 2022, compared to 6.8% in 2021. GDP growth is forecast at 0.7% in 2023 and 1.4% in 
2024.  Activity  is  expected  to  remain  subdued,  especially  over  the  first  half  of  2023,  due  to  low 
consumer  confidence  and  high  production  costs  weighing  on  investment,  as  a  result  of  high 
inflation. At the same time, domestic demand is expected to be underpinned by a favourable labour 
market,  with  the  employment  rate  projected  to  remain  high  relative  to  historical  levels.  Inflation 
picked  up  to  5.9%  in  2022.  The  pass-through  from  energy  and  food  prices  to  other  goods  and 
services  has  become  increasingly  visible  in  2022  and  is  expected  to  lead  to  further  increases  in 
core inflation, especially over the first half of the year, and wages over 2023. Hence, despite the 
expected  progressive  moderation  of  energy  prices,  HICP  inflation  is  expected  to  remain  high,  at 
5.5%  in  2023.  Going  forward,  with  inflation  progressively  moderating,  the  economy  is  set  to 
gradually rebound, mainly driven by domestic demand. The increase in energy prices brought about 
a sizeable deterioration of the current account deficit in 2022, to 3.1% of GDP. While the expected 
normalisation  of  energy  prices  is  expected  to  allow  for  some  improvement,  the  return  to  current 
account deficits close to that registered in 2021 (0.8% of GDP) is projected to be gradual. The main 
risks relate precisely to the response of wages to current price developments and the evolution of 
still  important  supply  shortages  that  might  delay  the  expected  gradual  return  to  more  moderate 
inflation rates.    

This  in-depth  review  presents  the  main  findings  of  the  assessment  of  macroeconomic 
vulnerabilities for France. The MIP assessment matrix is published in the 2023 Country Report 
for France. (4) 

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

(2)  European Commission (2022), Alert Mechanism Report 2023, COM (2022) 381 final. 

(3)  European Commission (2023), European Economic Forecast: Spring 2023, Institutional Paper 200. 

(4)  European Commission (2023), Country Report France 2023, SWD(2023) 610 final. 

4 

 
                                                 
 
2.  ASSESSMENT OF MACROECONOMIC 
VULNERABILITIES 

Gravity, evolution and prospects  

The French economy has proved resilient to the major macroeconomic shocks of the past 
three years with limited disruptions to the economy, albeit at substantial fiscal cost. In 
the wake of the earlier 2008 economic and financial crisis, France faced the challenge to bring its 
high public debt under control in the face of a dismal productivity growth. From the early 2010s, 
productivity and overall competitiveness emerged as significant challenges. The French productivity 
challenges  were  not  only  reflected  in  structurally  high  unemployment,  but  also  in  weak  export 
performance.  Moreover,  weak  productivity  growth  and  persistently  high  unit  labour  cost  (ULC) 
growth  contributed  to  erode  cost  competitiveness.  The  substantial  progress  in  improving  French 
competitiveness rests on numerous reforms the French authorities enacted over the past decade. 
The years of 2018-2019 had shown tentative signs of the reforms bearing fruit, yet progress was 
interrupted  by  the  pandemic  and  the  terms-of-trade  shock  from  Russia’s  war  against  Ukraine. 
Despite  the  size  of  the  shocks,  France  weathered  these  crises  relatively  well,  also  due  to  the 
deployment  of  sizeable  fiscal  packages  to  offset  the  effects  of  the  COVID-19  and  energy  crises. 
Accordingly, France emerges from them with clear signs of improved potential growth, estimated at 
1.1% in 2022 and expected to increase to 1.4% in 2023, a step change in the labour market, and 
restored export prospects. By contrast, the fiscal cost has been substantial, with public debt-to-GDP 
ratios at substantially above pre-pandemic levels. 

The  general  government  debt  ratio  is  projected  to  keep  declining  in  the  short  term, 
although remaining at high levels. 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. The outbreak of the pandemic 
hit  strongly  economic  activity  and  brought  about  a  sizeable  deterioration  of  public  finances.  The 
contraction in tax bases dragging down tax revenues and the sizeable fiscal response deployed by 
the French government to cushion the impact of the crisis pushed the general government deficit 
up  to  9.0%  of  GDP  in  2020,  while  the  public  debt  ratio  rose  by  some  17  percentage  points,  to 
114.6%  of  GDP.  In  2021,  the  strong  economic  rebound  and  the  associated  dynamism  of  tax 
revenues allowed for some improvement in public finances. Despite the economy slowing down due 
to the brisk increase in energy prices, public finances improved further in 2022, as the unwinding of 
most  Covid-related  emergency  measures  more  than  offset  the  fiscal  impact  of  the  measures 
adopted  to  mitigate  the  effect  of  the  energy  crisis.  Accordingly,  in  2022  France’s  public  deficit 
declined to a still high 4.7% of GDP and the public debt ratio fell to 111.6% of GDP. According to 
the Commission’s Spring 2023 Forecast, public debt is projected to keep falling, albeit at a slower 
pace  due  to  still  high  public  deficits,  to  reach  109.6%  in  2023  and  109.5%  of  GDP  in  2024  at 
unchanged policies. However, in the absence of any further policy action, public debt is projected to 
rise  again  in  the  medium  term,  to  125%  of  GDP  by  2033  (graph  2.1  a).  The  Commission’s 
assessment  shows  that  France  faces  high  fiscal  sustainability  risks  over  the  medium  term,  and 

5 

 
 
2. 

Assessment of macroeconomic vulnerabilities 

medium  risks  in  the  long  term. (5)  Public  debt  projections  are  especially  sensitive  to  interest  rate 
and  growth  developments.  The  possibility  of  higher future  interest  rates,  also bearing  a  negative 
impact  on  GDP  growth,  represent  a  risk  for  debt  projections,  leading  to  significantly  higher  debt 
ratios over the medium term. Likewise, backloading the consolidation efforts currently embedded in 
the French medium-term plans would also jeopardise the reduction of public debt ratios.  

Labour productivity growth in France is set to improve compared to the euro area and 
the EU. Since around 2005, France has been registering, on average, a negative labour productivity 
growth  differential  with  the  euro  area  and  the  EU  (graph  2.1  d).  However,  this  trend  started  to 
revert already before the outbreak of the COVID-19 crisis. While productivity growth has recently 
been  reined  in  by  still  ongoing  labour  hoarding,  labour  productivity,  measured  in  full-time 
equivalent  jobs,  is  projected  to  gain  momentum,  growing  in  line  with  the  euro  area  and  EU 
averages in the medium term. Despite this, structural weaknesses remain, weighing on total factor 
productivity growth, mainly due to still prevailing skills shortages and skills mismatches, the lack of 
digitalisation  among  SMEs  and  a  stagnating  business  R&D  intensity.  Going  forward,  labour  and 
total factor productivity are expected to benefit from recent measures and upcoming reforms that 
are  implemented  under  the  RRP  to  foster  innovation,  digitalisation  and  labour  force  up-  and 
reskilling, as well as by the effects of the investment plan France 2030. 

The  energy  crisis  weighed  on  some  competitiveness  indicators,  in  line  with  euro-area 
developments, but they are expected to improve in relative terms over 2023 and 2024. 
France’s  nominal  effective  exchange  rate  appreciated  over  2020  and  2021.  However,  the  lower 
inflation in France compared to peers allowed for a depreciation of price-based (both HICP and GDP 
deflator) real effective exchange rates in 2021 and – more so – in 2022. The growth in unit labour 
costs (ULCs) was moderate and significantly lower than in the euro area before the COVID-19 crisis 
(2.5%  between  2013  and  2019,  against  6.7%  in  the  euro  area), (6)  when  large  cuts  in  social 
contributions were adopted (transformation of the tax credit on competitiveness and employment, 
CICE,  cuts  at  the  minimum  wage  level  and  the  Responsibility  Pact).  While  ULCs  and  productivity 
figures  in  2020  and  2021  were  difficult  to  interpret  due  to  the  massive  deployment  of  partial 
unemployment schemes, wages and ULCs rose sharply in 2022 to partly offset the brisk increase in 
inflation  triggered  by  energy  prices.  For  2023  and  2024,  ULC  growth  in  France  is  expected  to 
remain  robust,  albeit  more  moderate  than  in  the  euro  area  or  the  EU  as  a  whole.  The  dynamic 
labour  market  still  weighs  on  labour  productivity  figures:  Unemployment  continues  to  shift  down 
markedly, and in line with established patterns the addition of new job holders, notably low-skilled, 
decreases average productivity. Expanding employment has been favoured by a number of fiscal 
measures  and  efforts  to  promote  apprenticeship  contracts,  and  by  labour  hoarding  in  the 
aeronautic  and  automobile  industries.  However,  employment  growth  is  expected  to  start  slowing 
down in the medium term, which would translate into faster labour productivity increases.  

French  export  performance  was  especially  exposed to  the pandemic, but  prospects  are 
positive.  The  aircraft  industry  was  strongly  hit  by  the  travel  restrictions  imposed  after  the 
outbreak  of  the  COVID-19  pandemic,  but  their  lifting  and  the    subsequent  recovery  of  world 
tourism  are  starting  to  impact  order  books  positively.  In  turn,  the  automotive  industry  has  been 
negatively affected by the disruptions in supply chains, in particular by those regarding electronic 
components. The negative contribution of the automotive sector to the external balance might have 
bottomed  out,  but  the  fading  out  of  more  recent  shocks  leaves  significant  uncertainty  about  the 
future of the sector in the country in a context of a structural shift of preferences towards electric 
vehicles. Part of the recent deterioration of export market shares witnessed since 2020 also related 

(5)  See the DSA in the Commission Country Report 2023 for the latest risk classification and Debt Sustainability Report 2022 

(April 2023) for methodological details. 

(6)  Measured in terms of people employed. 

6 

                                                 
2. 

Assessment of macroeconomic vulnerabilities 

to the chemical  sector and pharmaceutical  products as COVID-19 vaccines are produced in other 
countries.  Recently,  exports  picked  up  strongly  to  above  2019  levels  in  nominal  terms.  They  are 
expected to improve further over the next years, in line with the recovery of the tourism and the 
aircraft  industry,  the  fading  of  supply  chain  disruptions  and  the  expected  improvements  in 
productivity (graph 2.1 b).  

Overall, both cost and non-cost competitiveness are expected to improve going forward, 
but  risks  remain.  The  normalisation  of  energy  prices  might  help  alleviate  the  burden  of 
production  costs,  especially  amongst  the  most  energy-intensive  industries,  while  wage  growth  is 
expected to moderate by 2024 in view of gradual disinflation. In addition, recent reforms, including 
the reduction of production taxes, and investments should start paying off in the medium term via 
a positive impact on competitiveness and productivity, the increase of which would also stem from 
less  dynamic  employment  growth.  Accordingly,  unit  labour  costs  are  expected  to  decelerate  over 
the next two years, growing below the euro area and the EU on average, as well as the main EU 
trading  partners.  In  turn,  recent  and  expected  reforms,  as  well  as  the  full  implementation  of  the 
investment plan France 2030 are set to further fuel investment over the next decade in the green 
transition,  state-of-the-art  R&D  and  the  digital  realm,  while  providing  more  favourable  business 
conditions,  thereby  also  enhancing  non-cost  competitiveness.  However,  the  higher  cost  of  energy 
and wage increases as a result of high inflation have narrowed mark-ups. The behaviour of mark-
ups  across  sectors  is  so  far  very  heterogeneous,  with  no  significant  correlation  being  observed 
between  their behaviour  and  the  direct  exposure to the  energy  crisis. Yet, mark-ups  remain  high, 
above 30% on average, which shows that French firms weathered the crisis well and unveils their 
resilience  to  negative  shocks.  On  the  other  hand,  the  narrowing  of  mark-ups,  if  pursued,  could 
eventually weigh on investment and lead to an increase in bankruptcies, which might entail some 
damage  to  the  economic  tissue.  Conversely,  the  decline  in  energy  prices  and  the  expected 
moderation  of  labour  costs  would  create  favourable  conditions  for  mark-ups  to  be  restored,  at 
least partially. 

Private-sector  borrowing  peaked  in  2020,  and  left  the  private  sector  with  high  debt, 
above pre-pandemic levels. Private debt had been on an upward trend until the outbreak of the 
pandemic  in  2020,  when  it  peaked  at  175%  of  GDP  (graph  2.1  e).  In  particular,  corporate  debt 
levels are above those of most of France’s euro area peers. During 2020, the debt of non-financial 
corporations increased by 10 points of GDP amid low interest rates, government guarantees and a 
brisk GDP contraction. With the economic rebound in 2021, corporate borrowing edged down, but 
the  economic  slowdown  amid  dynamic  credit  on  the  back  of  high  investment,  pushed  corporate 
indebtedness  up  to  104.5%  GDP  in  2022.  Household  borrowing  followed  a  somewhat  different 
pattern,  peaking  in  2020,  edging  down  slightly  in  2021  and  broadly  stabilising  in  2022  amid 
dynamic credit flows, although decelerating substantially by the end of 2022. Overall, the private-
sector debt to GDP ratio thus saw a swing during the GDP decline and recovery of 2022-21, but at 
171% of GDP in 2022 continues to exceed its 2019 level by almost 20 pp of GDP, as well as the 
levels  suggested  by  economic  fundamentals  and  prudential  thresholds,  for  both  households  and 
non-financial  corporations. (7)  Going  forward,  the  increase  in  interest  rates  and  the  overall 
tightening  of  financing  conditions  might  bring  about  some  deceleration  in  credit  growth  in  the 
months  to  come.  Moreover,  credit  standards  for  corporate  and  housing  loans  tightened  since the 
summer of 2022.  

The  accumulation  of  sizeable  liquidity  buffers,  concomitant  to  the  increase  in 
indebtedness,  allowed  non-financial  corporations  to  maintain  relatively  solid  balance 
sheets  and  corporate  credit  keeps  flowing.  The  accumulation  of  corporate  debt  was 
accompanied  by  an  even  faster  increase  in  equity  and  financial  assets.  Accordingly,  the  ratio  of 

(7)  See European Commission, In-depth review for France 2022, staff working document SWD(2022) 632 final. 

7 

                                                 
2. 

Assessment of macroeconomic vulnerabilities 

total  liabilities  over total  financial  assets  or to  equity  have  shown  a downward  trend  since  2011 
especially  among  large  companies  (cf.  European  Commission,  In-depth  review  2021).  After  a 
temporary  uptick  in  2020,  this  trend  continued  in  2021  and  decelerated  somewhat  in  2022.  In 
parallel,  the  upward  trend  in  corporate  leverage  was  accompanied  by  a  continuous  decline  in  its 
debt  service,  which  bottomed  out  at  4.9%  of  gross  value  added  in  2019  and  remained  slightly 
above 5% until 2021 thanks to historically low interest rates. This trend was halted in 2022 as the 
brisk pick-up in inflation triggered by energy prices led to quick interest rate hikes that involved an 
increase  in  corporates’  debt  service  over  the  year.  Nonetheless,  according  to  the  euro  area  bank 
lending survey, corporate credit flows remained dynamic over the year, although the tightening of 
financing conditions might lead to some deceleration. In turn, after decreasing by a cumulated 50% 
in 2021 compared to 2019, corporate bankruptcies rose sharply in 2022 and in the first quarter of 
2023, but still remained around 24% below the pre-pandemic levels. (8)  

Risks  related  to  the  high  household  debt  remain  contained.  Nominal  credit  to  households 
decelerated in 2022, but their indebtedness as a percentage of their disposable income or assets 
rose slightly. The increase in household debt over the last two decades is mainly explained by loans 
for  house  purchases.  Commission  services’  calculations  suggest  a  potential  overvaluation  of 
housing prices between 12% and 30%. However, according to the Banque de France, (9)  in 2022, 
the  number  of  over-indebtedness  cases  was  7%  lower  than  in  2021  and  it  halved  since  2014, 
although  it  began  to  increase  again  in  the  first  quarter  of  2023 (10).  Moreover,  the  size  of  the 
indebtedness  of  over-indebted  households  declined  by  12%  compared  to  2021.  In  turn,  savings 
accumulated during the pandemic have not been depleted and saving rates are projected to remain 
above  pre-pandemic  levels.  While  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, the increase in interest rates has translated into an only slight uptick 
in  the  households’  interest  burden  as  a  share  of  their  gross  disposable  income  in  2022,  thereby 
remaining  low  for  historical  standards.  This  is  mainly  due  to  the  fact  that  outstanding  loans  for 
dwellings acquisition are almost entirely at fixed rates (above 99%). Moreover, the share of non-
performing loans kept falling. 

Assessment of MIP relevant policies  

Recent  reforms  have  delivered  some  improvements  to  cost-competitiveness,  mainly  by 
reducing  the  cost  of  labour.  Cost-competitiveness  has  been  supported  by  a  number  of  fiscal 
measures  in  recent  years.  They  include  the  permanent  cut  in  social  contributions  since  2019  (to 
replace the previously existing tax credit on competitiveness and employment, CICE), the permanent 
EUR 10 billion reduction in production tax (0.4% of GDP), the halving of the tax on the value-added 
of  enterprises,  mainly  targeted  to  the  industry,  the  support  to  apprenticeship  contracts  and  the 
successive  cuts  in  the  corporate  income  tax.  Some  of  these  measures  addressed  long-lasting 
country-specific recommendations issued to France by the Council. These measures are deemed to 
have  reduced  the  fiscal  burden  on  labour  and  contributed  to  the  recently  dynamic  employment 
performance, especially among the low skilled, and to a reduction of the unemployment rate that is 
underway.  The  slowdown  in  labour  productivity,  partly  due  to  the  employment  dynamism,  should 
gradually gain momentum as the labour market assimilates these reforms.  

(8)  See Banque de France, Suivi mensuel des défaillances, Mars 2023. 

(9)  See Banque de France, Enquête typologique sur le surendettement des ménages en 2022, Février 2023. 

(10)  https://particuliers.banque-france.fr/sites/default/files/media/2023/04/13/barometre_avril.pdf. 

8 

                                                 
2. 

Assessment of macroeconomic vulnerabilities 

A number of reforms and investments should deliver further improvements in  non-cost 
competitiveness  and  productivity.  Reforms  aimed  at  enhancing  productivity  and  non-cost 
competitiveness  include  the  PACTE  law,  adopted  in  May  2019,  which  main  objective  was  to 
enhance  firms’  growth  and  promote  their  innovation.  Several  initiatives  were  taken  to  improve 
labour market efficiency. In particular, the unemployment benefit reform that entered into force in 
2021, or the September 2017 labour law ordonnances that fully entered into force in 2018, aimed 
to encourage the use of open-ended contracts, provided stronger incentives to work and promoted 
decentralised bargaining further. Besides, significant productivity-enhancing investments to support 
the green and digital transition and research have been made 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  billion.  The  Plan  also  entails  investment  in  up-  and  re-skilling  the  labour 
force (including digital) in order to reduce the important skill mismatches in the labour market. (11) 
These reforms and investments are starting to bear fruit in view of the recent uptick in potential 
growth  (graph  2.1  c)  and  are  expected  to  entail  a  positive  effect  on  productivity  in  the  medium-
term.  Likewise,  the  investment  plan  France  2030,  endowed  with  EUR  30  billion,  is  expected  to 
foster  investment  over  the  next  decade  on the  green  transition,  state-of-the-art  R&D  and  on  the 
digital  realms,  with  the  aim  to  provide  a  renewed  impulse  to  reindustrialisation  and  reduce  the 
external  dependence on strategic areas. In addition, accelerating industry’s transition towards net 
zero is expected to reinforce resilience and non-price competitiveness. By having a positive impact 
on productivity, these reforms should also contribute to enhancing public debt sustainability. 

Some  measures  to  contain  public  expenditure  growth  and  to  underpin  public  debt 
sustainability  have  been  adopted,  but  their  effects  will  depend  on  a  sufficiently 
ambitious  implementation.  Efforts  to  consolidate  government  finances  before  the  crisis  only 
modestly reduced the public expenditure ratio. After a brisk increase in 2020 led by the COVID-19 
crisis, public expenditure has declined by more than 3 percentage points, to some 58% of GDP in 
2022.  This  level  is  the  highest  in  the  EU  and,  according  to  the  2022  Commission  2022  autumn 
forecast, it is projected to remain so and still around 1 point of GDP above pre-pandemic levels at 
least  until  2024.  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. Some of the 
measures  contained  in  the  French  Recovery  and  Resilience  Plan  are  expected  to  support  such 
consolidation.  Specifically,  the  organic  law  on  the  modernisation  of  public  finances  management 
that entered into force in 2022 introduced a multi-annual expenditure rule applicable to total public 
spending  and  extended  the  prerogatives  of  the  national  fiscal  council  (i.e.,  High  Council  of  Public 
Finances, HCPF). While the organic law was adopted, the objections by the opposition parties has 
prevented the public finances programming law from being approved so far. The latter sets out the 
multiannual  fiscal  targets,  including  the  expenditure  standard,  which  is  essential  for  the  proper 
functioning  of  the  new  framework.  Moreover,  the  new  mechanism  aimed  to  conduct  regular 
evaluations  of  public  spending,  with  the  aim  of  identifying  the  most  efficient  expenditures 
favouring growth, social inclusion and the green and digital transition, has also been approved. This 
mechanism foresees that the main conclusions of such annual evaluations should be presented to 
the  Parliament  before  the  1st  of  June.  A  first  set  of  saving  measures  based  on  past  spending 
reviews  conclusions  has  been  incorporated  in  the  2023  budget  laws  on  an  ad-hoc  basis.  These 
measures represented savings of around EUR 2.5 billion (0.1% of GDP). The effectiveness of these 
measures  to  curb  public  expenditure  and  to  put  public  debt  on  a  sustained  downward  trend  will 

(11)  According to the French government, the French recovery plan France Relance, partly financed with RRF grants, is expected 
to bring about a positive effect on GDP of some 0.5% by 2025 and of 0.8% by 2023. Likewise, the Commission estimated 
that the French recovery and resilience plan (which is part of the broader plan France Relance) would lead to an increase of 
GDP of 0.8% in 2025 and of 0.4% by 2030. See European Commission, Analysis of the recovery and resilience plan of 
France, staff working document SWD(2021) 173 final. https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A52021SC0173&qid=1624626969458.   

9 

                                                 
2. 

Assessment of macroeconomic vulnerabilities 

crucially  depend  on  the  effective  implementation  and  degree  of  ambition  of  the  multiannual 
expenditure standard, strictly linked to the potential savings stemming from the revamped annual 
spending review mechanism.  

A  new  reform  aims  to  reinforce  the  sustainability  of  the  pension  system.  Outside  the 
scope of reforms in the RRP, the French government has passed a new pension reform, aiming at 
restoring the financial balance of the system by 2030. The main elements of the reform are the 
increase of the statutory retirement age from 62 to 64 years, the acceleration of a previous reform 
extending  the  required  contribution  period  and  the  ending  of  some  of  the  main  special  pension 
schemes, (12). According to the September 2022 projections by the pension advisory council (Conseil 
d’orientation des Retraites, COR), the current pension system would accumulate deficits in the long 
term  of  EUR  12.4  billion  in  2027,  EUR  13.5  billion  in  2030  and  EUR  21  billion  in  2035.  The 
measures  envisaged  by  the  reform  are  expected  to  bring  the  system  back  to  balance  by  2030, 
thanks  to  net  savings (13)  amounting  to  EUR  8.3  billion  in  2027  and  EUR  13.7  billion  in  2030 (14) 
(0.3%  and  0.5%  of  2022  GDP,  respectively;  2.4%  and  4%  of  pension  expenditure  in  2021, 
respectively). However, there is a risk that after this date the system returns to deficit, especially if 
unemployment does not evolve in line with the government’s projections. In any case, the reform is 
expected to have a positive impact on public debt sustainability. 

Public support measures during the COVID-19 crisis supported lending growth. The public 
loan  guarantee  scheme  set  up  by  the  state  has  played  an  important  role  in  supporting  lending 
during the  crisis, especially  to  SMEs,  and  prevented  corporate  bankruptcies.  The  latter  declined  in 
2021 with respect to both 2020 and even with respect to pre-pandemic years. By the end of 2022 
bankruptcies  rebounded  strongly,  although  they  remained  below  pre-pandemic  levels,  which 
suggest  some  normalisation.  In  turn,  in  2022  non-performing  loans  remained  rather  stable  for 
corporations  and  declined  for  households.  The  macroprudential  measures  adopted  by  the  French 
authorities  since  the  outbreak  of  the  COVID-19  crisis  have  contributed  to  ensuring  an  adequate 
provision  of  credit  and  credit  standards  for  households’  loans  have  improved.  On  27  December 
2022, the High Council of Financial Stability (Haut Conseil de Stabilité Financière, HCSF) decided to 
raise the countercyclical capital buffer up to 1.0%. (15) This decision is expected to provide further 
resilience  to  the  financial  sector  without  implying  any  rein  in  credit  flow,  in  that  the  financial 
institutions have enough reserves. 

Conclusion  

In  France,  vulnerabilities  relate  to  high  public  debt,  and  to  competitiveness  and  low 
latter  continue  to  recede.  These 
productivity  growth  challenges,  although  the 

(12)  The reform proposal assimilates the special schemes for all new recruits to the Paris public transport company (Régie 
autonome des transports parisiens, RATP), the electricity and gas industries (e.g. EDF), the Banque de France, clerks of 
notaries and CESE (French Economic, Social and Environmental Council), which altogether cover around 500 000 
employees, to the general pension regime. 

(13)  The increase of the statutory retirement age and the acceleration of the increase of the contribution period would lead to 

savings of EUR 10.3 billion in 2027 and EUR 17.7 billion in 2030. These savings in 2030 would more than compensate the 
expected deficits of the system (EUR 13.5 billion). However, the reform proposal also includes so-called ‘accompanying 
measures’, which imply a cost of EUR 2 billion in 2027 and EUR 4 billion in 2030. 

(14)  The government’s projections assume a productivity increase of 1 % per year and a long-term unemployment rate of 4.5 % 
(from 7.3 % today). An assumption of 7 % unemployment would increase the projected deficit at 2030 (before reform) 
from EUR 13,5 billion to almost EUR 20 billion. 

(15)  Haut Conseil de Stabilité Financière (2022), Decision nº D-HCSF-2022-06. 27/12/2022.   

10 

                                                 
2. 

Assessment of macroeconomic vulnerabilities 

vulnerabilities  have  cross-border  relevance.  Public  sector  debt  has  been  a  long-standing 
vulnerability  in  France.  As  a  result  of  the  pandemic  and  the  sizeable  fiscal  package  deployed  to 
assuage  its  socio-economic  effects,  public  debt  rose  by  some  17  points  of  GDP  in  2020,  but  it 
edged down with the rebound in economic growth in 2021. The numerous fiscal measures adopted 
in the context of the energy crisis significantly mitigated the impact of the shock, but their sizeable 
budgetary  cost  (1%  of  GDP)  prevented  a  faster  public  deleveraging  in  2022.  Public  debt  is 
projected to keep declining slowly until 2024, although it will remain high and above pre-pandemic 
levels. Moreover, in the absence of any further policy action, public debt is projected to rise again in 
the  medium  term.  Accordingly,  fiscal  sustainability  challenges  remain  high  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. There has been a 
gradual  improvement  in  cost  competitiveness  over  time,  and  associated  indicators  were  less 
adversely  affected  by  the  increase  in  energy  prices  than  in  France’s  main  EU  trading  partners  in 
2022. Labour productivity is reined in by the positive response of employment to a number of fiscal 
measures and reforms. However, it is expected to grow above the euro area and the EU in the short 
term, while benefitting form an additional  impulse form investments  and reforms in the pipeline. 
Despite the sharp negative impact of high energy prices on the current account balance in 2022, 
export  prospects  are  positive,  in  line  with  the  recovery  of  the  tourism  and  the  aircraft  industry, 
which have been negatively affected by the pandemic. In turn, cost-competitiveness is expected to 
improve going forward, as some normalisation of energy prices might help alleviate the burden of 
production costs, and lower inflation should be reflected in contained wage rises accordingly. The 
response  of  wages  to  current  price  developments  and  the  evolution  of  still  important  supply 
shortages emerge as risks for competitiveness. Moreover, higher future interest rates might weigh 
on GDP growth, making public and private deleveraging more difficult.  

The policy response to imbalances has been broadly appropriate, but will require further 
sustained efforts. Important reforms have contributed to alleviating the fiscal burden on labour. 
By helping reduce the cost of labour, these measures have brought about a dynamic employment 
response, especially amongst the low-skilled, allowing for a gradual decline in the unemployment 
rate.  However,  this  dynamism  of  employment  has  weighed  on  labour  productivity.  If  fully  and 
ambitiously  implemented,  the  reforms  and  the  productivity-enhancing  investments  in  the  RRP  to 
support the  green  and  digital  transition  and  research  would  play  an  important  role  in  addressing 
the  persisting  structural  competitiveness  challenges  and  the  relatively  slow  productivity  growth. 
Likewise, 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. In turn, 
the reform of public finances management entered into  force in 2022, and a new mechanism to 
conduct annual public spending evaluations has been adopted, jointly with the 2023 budget laws. 
An effective implementation of these two reforms is crucial to address fiscal sustainability risks, as 
it  would  help  to  curb  public  expenditure  and  to  put  public  debt  on  a  sustained  downward  trend. 
Finally, the government has adopted a reform of the public pension system, aiming at ensuring the 
financial  balance  of  the  system  by  2030.  The  reform  is  expected  to  have  a  positive  impact  on 
public debt sustainability. 

Based on the findings in this in-depth review, the Communication “European Semester – 
2023  Spring  Package” sets  out  the  Commission’s  assessment  as  to  the  existence  of 
imbalances or excessive imbalances in France, in line with Regulation 1176/2011. (16) 

(16)  European Commission (2023), European Semester Spring Package 2022, COM(2023)600 final. 

11 

 
 
                                                 
2. 

Assessment of macroeconomic vulnerabilities 

Graph 2.1: Selected graphs, France 

Source: Eurostat, Ameco, European Commission services 

12 

-1001020304050600506070809101112131415161718192021% of GDPf) Gaps to prudential and fundamentals-based benchmarksGap to prudential benchmark (NFC), ppsHouseholds debt gap to fundamentals-based benchmark, ppsHouseholds debt gap to prudential benchmark, ppsGap to fundamentals-based benchmark (NFC), pps808590951001051101151201251302020202120222023202420252026202720282029203020312032a) Public debt projections-80201202203200910111213141516171819202122% of GDPe) Decomposition of debt, consolidatedGovernmentHouseholdNon financial corporationsPrivate sector8085909510010511011512015161718192021222324GermanyItalyUKUSJapanCanadab) Nominal exports (2019=100)-0.500.511.522.5151617181920212223*24*%GermanyItalyUKJapanCanadaUSFrancec) Potential GDP growth929496981001021041061082012201320142015201620172018201920202021202220232024d) Labour productivityFRDEITESEA 
  
2. 

Assessment of macroeconomic vulnerabilities 

Box 1: Inflation exposures and cross-border pass-through 

This  box  sheds  light  on  the  sources  of  inflation  in  France  and  its  spillovers  with  EU 
partners.  The  period  since  2021  has  been  characterized  by  pandemic  aftershocks  and  global 
supply  chain  disruptions  compounding  global  inflationary  pressures  and  a  surge  in  commodity 
prices  triggered  by  Russia’s  war  of  aggression  against  Ukraine.  As  a  result,  inflation  in  France 
surged to unprecedented levels. In response, wages and profits also picked up across the EU, which 
further  added  to  price  pressures  in  France.  With  input-output  data,  domestic  inflation  can  be 
decomposed into the contribution from key cost factors. Taking into account some data limitations, 
the  framework  can  be  used  to  attribute  consumer  and  investment  price  changes  to  i)  extra-EU 
import  price  changes,  which  include  both  directly imported  inflation  and  inflation  passed  through 
from  EU  partners  import  costs  ii)  domestic  unit  labour  cost  changes  iii)  domestic  unit  profit 
changes, including indirect taxation changes and iv) rest-of-EU value added price changes. (17) 

Data suggests that much of inflation in France in 2022 reflected surging energy prices, 
while  the  importance  of  domestic  factors  is  projected  to  increase.  In  2022,  as  shown  in 
Graph  2.2,  energy  imports  were  key  drivers  of  consumption  inflation  whereas  the  role  of  energy 
prices  was  minor  for  investment  inflation.  Extra-EU  non-energy  imports  also  contributed  to  the 
pick-up  in  inflation  in  France.  Spillovers  from  other  EU  countries  remained  limited,  however. 
Namely,  import  cost  pass-through  from  EU  partners  increased  domestic  consumption  inflation 
somewhat,  whereas  value  added  inflation  in  other  EU  countries  had  only  a  negligible  impact. 
Consumption inflation was not markedly affected by domestic factors, wages and profits. However, 
the contribution from wages to investment inflation was sizeable. The impact of energy inflation is 
set to subside and to eventually dampen inflation in 2024. Similarly, the impulse from non-energy 
import  prices  is  expected  to  fade.  However,  the  contribution  from  both  unit  labour  cost  and  unit 
profits is expected to increase in both 2023 and 2024 compared to 2022. Spillovers from inflation 
in other EU countries are set to remain marginal. 

The  impact  of  wage  and  profit  growth  in  France  on  other  Members  States  remains 
limited.  Although  France  has  a  non-negligible  impact  on  domestic  demand  in  other  Member 
States,  spillovers  from  value-added  inflation  in  France  are  set  to  remain  contained  vis-à-vis  the 
significant impact from import prices (see Graph 2.3). Overall, value added inflation in France has 
contributed  little  to  consumer  inflation  in  the  rest  of  the  EU  so  far.  Most  exposed  countries  are 
Belgium and Ireland with inflation spillovers at just over 0.1 pps. p.a. over the forecast horizon. 

(17)  The graphs below are based on national accounts data and the Commission’s Spring 2023 forecast, which are combined 
through a ‘Ghosh’ matrix based on Eurostat’s Figaro input-output available for 2015-2020. HICP is taken as the measure of 
the price of private consumption, including non-residents. Energy import prices from extra-EU reflect realised median prices 
until  2022,  and  energy  price  assumptions  underlying  the  Spring  forecast  thereafter.  Other  goods  prices  reflect  median 
Eureopan  prices  per  industry  until  2022,  and  forecast  non-energy  goods  and  service  trade  prices  for  2023-2024.  Value 
added  deflators are assumed to  affect  all industries within a country to the same degree. Changes  in import prices and 
value  added  deflators  are  assumed  to  affect  demand  prices  with  a  delay  of  7  and  5  months  for  consumption  and 
investment  inflation,  respectively.  For  a  similar  analysis  using  an  input-output-based  methodology,  see  “Inflation 
Differentials  in  Europe  and  Implications  for  Competitiveness:  Thematic  Note  to  Support  In-Depth  Reviews”  European 
Commission 2023, Institutional paper 198. 

13 

 
                                                 
Graph 2.2: Components of gross fixed capital formation deflator growth and consumer price 
inflation 

2. 

Assessment of macroeconomic vulnerabilities 

Source: European Commission services 

Graph 2.3: Impact of French value-added inflation on EU partners’ consumer price inflation 

Source: European Commission services 

14 

-2-101234567161718192021222324% change (year-on-year)FR: contribution to domestic GFCF deflator growth-4-202468161718192021222324% change (year-on-year)FR: contribution to domestic CPI deflator growthDomestic ULCUnit profits (&taxes)RoEU value added deflatorEnergy imports from Extra-EUOther imports from Extra-EURoEU import cost passthr.ResidualDeflator growth YoY00.050.10.150.20.2519-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-2419-2222-24 .CYBEMTLUIEROESPTITHUGRNLCZHRDKSIEESKDEBGFILVSEATPLRoEApp contribution to average annual change of CPIFR contribution to average annual change of CPI in other MSPassthrough of FR unit labour costPassthrough of FR unit profits (& ind. taxes)Passthrough from FR energy import costPassthrough from other FR G&S imports 
  
 
     
 
 
 
Table 2.1: Selected economic and financial indicators (Part 1), France 

2. 

Assessment of macroeconomic vulnerabilities 

(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 halve the gap between the NIIP and the 
indicative MIP benchmark of -35% of GDP over the next ten years, or to stabilise the NIIP at the current level if it is 
already above the indicative MIP benchmark. 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 2023-04-28, where available; European Commission for forecast figures (Spring forecast 
2023) 

15 

all variables y-o-y % change, unless otherwise stated2003-072008-122013-18201920202021202220232024Real GDP 2.00.41.31.8-7.86.82.60.71.4Potential growth  (1)1.81.20.80.80.81.11.11.11.1Contribution to GDP growth:Domestic demand 2.30.51.32.1-6.57.02.70.61.4Inventories 0.1-0.10.20.0-0.2-0.30.60.00.0Net exports -0.40.0-0.2-0.3-1.20.1-0.70.10.0Contribution to potential GDP growth (1):Total Labour (hours) 0.50.40.20.20.50.70.70.70.6Capital accumulation 0.70.60.50.60.30.50.60.60.6Total factor productivity 0.60.30.20.0-0.1-0.1-0.1-0.10.0Output gap (2)1.5-1.2-0.92.2-6.5-1.20.2-0.30.0Unemployment rate8.69.09.98.48.07.97.37.47.5Harmonised index of consumer prices (HICP)2.01.90.91.30.52.15.95.52.5GDP deflator 2.01.11.11.32.81.33.05.42.6External positionCurrent account balance (% of GDP), balance of payments0.3-0.7-0.70.5-1.80.4-2.1-0.5-0.3Trade balance (% of GDP), balance of payments0.4-1.3-0.7-0.9-1.8-1.2-3.3..Primary income balance (% of GDP)1.72.42.23.21.83.32.8..Secondary income balance (% of GDP)-1.8-1.8-2.1-1.8-1.9-1.7-1.6..Current account explained by fundamentals (CA norm, % of GDP) (3)-0.20.30.40.50.40.10.10.0-0.1Required current account to stabilise NIIP above -35% of GDP over 20Y (% of GDP) (4)0.0-0.2-0.6-0.9-1.3-1.2-0.8-0.8-0.7Capital account balance (% of GDP)-0.10.00.00.10.10.50.4..Net international investment position (% of GDP)-4.4-11.9-16.2-24.6-30.7-32.1-26.2..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (5)-6.4-23.8-30.9-35.2-41.3-37.2-31.8..Net FDI flows (% of GDP)1.51.51.01.10.2-0.4-0.4..CompetitivenessUnit labour costs (ULC, whole economy)1.62.11.4-0.74.80.54.84.92.1Nominal compensation per employee 3.02.31.50.0-2.74.75.05.43.1Labour productivity (real, hours worked)0.90.21.00.40.5-1.5-1.90.21.0Real effective exchange rate (ULC)0.20.0-0.3-3.30.50.11.6-0.6-1.5Real effective exchange rate (HICP)1.3-0.80.4-1.41.0-0.2-4.1..Export performance vs. advanced countries (% change over 5 years)-5.3-9.1-3.3-2.4-8.0-7.4...Private sector debtPrivate sector debt, consolidated (% of GDP)109.5131.7143.0153.1175.0167.8164.2..Household debt, consolidated (% of GDP)41.753.057.262.268.666.766.2..Household  debt, fundamental benchmark (% of GDP) (6)37.943.651.055.760.561.361.6..Household  debt, prudential threshold (% of GDP) (6)48.344.742.039.940.940.739.7..Non-financial corporate debt, consolidated (% of GDP)67.778.885.890.9106.4101.198.0..Corporate debt, fundamental benchmark (% of GDP) (6)52.254.656.257.361.462.162.5..Corporate debt, prudential threshold (% of GDP) (6)49.747.245.343.146.246.645.6..Private credit flow, consolidated (% of GDP) 7.75.65.28.413.56.58.3e..Corporations, net lending (+) or net borrowing (-) (% of GDP)1.10.9-0.1-0.4-1.11.3-1.10.00.4Households, net lending (+) or net borrowing (-) (% of GDP)2.43.72.82.87.64.83.33.53.0Net savings rate of households (% of net disposable income)9.210.08.59.215.512.8...forecast 
     
 
 
 
 
Table 2.2: Selected economic and financial indicators (Part 2), France 

2. 

Assessment of macroeconomic vulnerabilities 

(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 2023-04-28, where available; European Commission for forecast figures (Spring forecast 
2023) 

16 

all variables y-o-y % change, unless otherwise stated2003-072008-122013-18201920202021202220232024Housing marketHouse price index, nominal11.90.80.43.35.26.36.4..House price index, deflated9.8-0.3-0.32.54.14.71.3..Overvaluation gap (%) (7)7.615.06.79.914.018.220.3..Price-to-income overvaluation gap  (%) (8)5.513.810.610.715.518.520.0..Residential investment (% of GDP)6.16.46.16.56.16.96.8..Government debtGeneral government balance (% of GDP)-3.2-5.5-3.4-3.1-9.0-6.5-4.7-4.7-4.3General government gross debt (% of GDP)65.483.196.397.4114.6112.9111.6109.6109.5Banking sectorReturn on equity (%)9.54.86.16.44.57.3...Common Equity Tier 1 ratio.10.714.316.117.017.0...Gross non-performing debt (% of total debt instruments and total loans and advances) (9)2.64.23.42.22.01.7...Gross non-performing loans (% of gross loans) (9)..3.52.52.21.91.8..Cost of borrowing for corporations (%)4.03.11.71.41.21.33.1..Cost of borrowing for households for house purchase (%)4.14.02.11.21.21.12.1..forecast