French Debt Discipline: The Path of Sustainability in the 21st Century

The paper examines the stochastic dynamic record of French governmental debt and its evolution during the current century under the euro regime. We construct detailed breakdowns of the components driving the pattern of debt accumulation according to standard practices of debt accounting and debt management techniques. Using rolling time series estimates built around the fundamental debt accumulation framework, we build the evolution of the pattern of debt sustainability forecasts. This empirically-based analysis is matched with the time outline of the development of instruments to contain Eurozone market fragmentation; in particular the ECB tools of Outright Monetary Transactions (OMT) and the Transmission Protection Instrument (TPI). We also discuss the constraining factors impacting French debt sustainability under the new guidelines being implemented by the European Commission.