Students protest in France, as fiscal concern mounts

Will Bain (0:01)

As more protests in France loom, tough choices on public spending remain.

Laurent Neri (0:06)

If we don't scream, they will not listen to us.

Mary Radcliffe (0:09)

It's not just high schoolers, it's all the society we want to change.

Jean-Claude Trichet (0:13)

We need a budget. The worst would be to have no budget at all. We will see. It is really history in the making.

Will Bain (0:19)

It's World Business Report from the BBC World Service. More on how France is ballooning debt, is making tough choices on things like public salaries and pensions even more complicated. And also today, the business documentary that's left the critics well as aghast it seems as its subject matter did the business world. We'll talk thereinose, Elizabeth Holmes, and you can see everything on World Business Report.

Hello. Yeah, I'm Will Bain. Great to have you with us. Debt, I think, has been something of a theme for us on World Business Report through the week, hasn't it? Both for countries and for companies, with warnings from the financial markets about what's going on with companies and the level of debt there, and then the likes of the International Monetary Fund, the IMF, warning around debt for companies. A lot for Will Compenal on his World Business Report debut to break down for us. Will's the macro strategist, FHN Financial, joining us from Chicago for the first time. Will, great to have you on the programme. Thanks for being with us.

Will Compton (1:26)

Happy to be here.

Will Bain (1:27)

Is that a fair summation of the week? Debt, the kind of theme for you guys?

Will Compton (1:31)

Yeah, well, of course, you know, the company I work for is very focused on fixed income. So all we do is think about debt. If there was no debt, we wouldn't really get our paychecks. But no, on a more serious note, I think, you know, you see the wide deficit in the US and across the euro zone, and it's driving interest rates higher. And a lot of the underlying forces are nothing new, right? We have these demographic forces that are causing retirement schemes to be more expensive.

We were already running these annual deficits during relative peak time when we're not in a recession. And now we have the AI hyperscalers competing for capital with high-income sovereign countries. So it's this perfect storm of things that really cause high interest rates. And in the case of a country like France, I think the sell-off in French debt itself is exacerbating those fears because of course the higher your sovereign bond yields are, the higher your debt service payments become.

Will Bain (2:36)

Yeah, we'll get Will to keep picking through that for us in a moment. And perhaps keep looking at what's been going on with those companies as well. Something we were talking about on the program last night. But as Will mentions, we thought it might be worth focusing on France, not least because I'm sure if you're listening across the World Service through the weekend, you're going to hear a lot about more protests from those students about the state of France's schools that are set through the weekend. We've been speaking to a man who knows not just the picture at Homewell, but across the continent to Jean-Claude Trichet, former governor of the Central Bank of France, but also the former head of the ECB, the European Central Bank, the eurozone wide body there. We started by asking him about global debt. Had those warnings, didn't we, at the start of the week on the program from Kristalina Georgieva and the IMF about what's going on there. Was he worried too about the level of debt full stop around the world?

Jean-Claude Trichet (3:26)

I certainly think that at a global level, we have a level of debt outstanding as a proportion of GDP, which is today obviously significantly higher than was the case before the so-called subprime and human brother crisis. So there is no point for any complacency.

Will Bain (3:46)

The issue is that at the same time, some of those same factors are driving up pain, I guess, economic pain for households and for businesses in lots of these countries. And as a result of yet another kind of shock, particularly around energy as we come into this winter, they are looking for support again and support costs money. Balancing those two things, cutting spending at a time when actually more companies and more households are looking for support than before doesn't seem straightforward.

Jean-Claude Trichet (4:15)

Yes, you're right. Of course, it's a very complex situation because the integral of what has been done in the past is bad, obviously. Otherwise, the debt outstanding would not be that high. And the present moment is very difficult because we have, I would say, some kind of energy shock coming out of the two wars that unfortunately seems to be very, very lasting, both of them. Of course, it creates a lot of problems. The problems are even perhaps more acute in Europe because we are not self-sufficient as regards to energy.