PARIS: France needs to borrow 170 billion euros ($220 billion) next year but the rates at which it borrows are likely to remain low provided it holds to targets for cutting the public deficit.
Another factor playing in favour of low borrowing rates for France, despite the "critical" state of its debt, is the high risk associated with bonds issued by Greece, Portugal, Spain and to a lesser extent Italy.
Risk aversion has driven funds into assets regarded as relatively secure, and so far this asset class includes French government bonds.
The borrowing target emerged with details of the budget for next year, presented on Friday.
The budget is intended to raise taxes and cut spending by a total of 36.9 billion euros ($47.6 billion), against a background of unexpectedly weak growth, to reduce the public deficit from 4.5 percent of gross domestic product this year to 3.0 percent in 2013, in line with a European Union limit.
Finance Minister Pierre Moscovici, presenting the new Socialist government's first budget to the public finance committee of the National Assembly (parliament), warned the country's debt is approaching the danger zone.
"We are now at 91 percent (debt to output), which is an absolutely critical level as it is accepted by every economist that debt above 90 percent represents a sustained threat to growth."
This year France has been able to borrow at exceptionally low levels, even at theoretically negative rates for some short-term debt since the beginning of July.
Even though one of the leading credit rating agencies, Standard&Poor's downgraded its prized triple "A" rating for France in January, France has been able to borrow for the medium and long term at rates of less than 2.0 percent.
The French debt management agency AFT describes these rates as "a record".
These conditions mean that the cost of servicing the debt this year could turn out to be 2.1 billion euros less than the finance ministry had planned for a year ago.
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