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France will be the next country hit by debt crisis

“France will be the next country hit by the debt crisis”

Europe continues to tremble. After Ireland, Portugal and Greece, it was the turn of Italy’s third largest economy of the European Union, to be hit hard by the crisis of its public debt. In an interview with Point.fr, Philippe Dessertine, Professor of Finance at the University of Paris X-Nanterre and Director of the Institute of High Finance, which publishes in October only hope of a new world (Editions Anne Carrière), explains how one of the pillars of the euro area has been contaminated so quickly and why France should be prepared to suffer the same fate.

Point.fr: How can we explain the current crisis affecting Italy

Philippe Dessertine: We are witnessing a faster contamination than expected crises Greek and Portuguese. It is wrong to forget that Greece is a significant piece of the puzzle of the euro area. On the other hand, do not forget that Italy already has a debt ratio result, with 120% of GDP and an annual deficit of 4.5%. As such, it is slightly ahead of us.

France could it also be affected by the crisis

We are moving towards the austerity general in Europe. As for France, it is the next country on the list. The question is not whether we will be affected, but when. You should know that France has a large public debt, with 85% of its GDP, and an annual deficit of 7%. In other words, the situation in France is better than in Italy, but much faster empire. Hence the simple question: can we afford not to decide before the end of 2011.

What are the solutions?

Italy recently implemented an austerity plan quickly, which partially stemmed the decline, and provided certain guarantees to investors. But do not kid ourselves. It is really only a patch which only serves to stop the bleeding for three days. To reduce the debt would require members of the European Union set up a real rescue plan by providing massive loans to the European Central Bank or the European Stability Fund. These two bodies are already loaded to absorb the heavy debt Greek and Portuguese, besides this date remains too distant from the speed of contagion.

How this austerity will result does in our daily lives?

To absorb one hundred billion euros, the French government will have no choice but to raise taxes and VAT, as is already the case in Greece, Ireland, the United Kingdom or Spain. But the most difficult to accept the taxpayer is that these samples will not fund the public service, but the debt, and that he will not color. Faced with these enormous sums, the current measure does not replace the retired civil servants do not carry much weight.

The euro is at risk?

The euro is clearly threatened if the European Central Bank collapses. This represents both the risk of collapse of international trade and a deep geopolitical crisis, which can lead to a world war. This is what happens when states are facing an inability to exchange goods, that only an international currency can sound.

The debt crisis in Europe is stronger than it the subprime crisis

We are still in the same attack. In 2009, he was also a debt crisis, but privately, which affected banks and caused their failure. We hoped to get away with growth, but it is not at the rendezvous. Today, it is the States that go bankrupt. This insane debt simply reflects the fact that the West is living beyond its means.

By Armin Arefi