Although the budget was less controversial than last year, George Osborne is in a difficult position. Unemployment rose in the latest figures, the economy has failed to grow for a long time and elevated inflation is grinding down the purchasing power of British families – as shown by the Asda Income Tracker. Though politically a long distance from the Chancellor, across the Channel French President Francois Hollande finds himself in a similarly uncomfortable position. Recession, elevated unemployment and the sacking of his Budget Minister over a Swiss bank account have taken their toll.

 

The similarities don’t end here. The graph above shows that the public debt burdens of France and the UK are on a similar trajectory. Before the financial crisis, France had a substantially larger amount of sovereign bonds outstanding, but the stronger dislocations in the UK’s financial sector prompted a bigger surge in public debt. The difference between the UK and France in terms of gross general government debt has shrunk to just 0.4% of GDP. It’s also worth noting that at 90.0% for the UK and 90.4% for France, both counties stand above the European Union’s 85.4% average.

 

Both countries have been stripped of their top-of-the-line credit ratings by some agencies as it has become clear that public debt burdens are set to rise for years to come. France and the UK are on a similar course here, though perceptions are very different. When Francois Hollande came to power he criticised austerity whereas George Osborne has been a steadfast defender of public spending cuts.

 

The IMF has recently criticised the UK for its public austerity strategy. That seems a little unfair as Cebr projects a public deficit of 7.2% of GDP for the UK which can hardly be described as austere. It is nearly double the 3.7% projected by France and will result in the red line moving ahead in 2013. The UK is about to overtake France, but both are going in the wrong direction.