France has slipped into a cycle of "perpetual debt" and must take drastic action to clean up its public finances, a senator charged with examining financial issues warned on Thursday.

"We have entered a system of perpetual debt" in which revenues leak away to pay the interest on existing loans, said Jean-Pierre Fourcade, special rapporteur of a Senate finance commission, told reporters.

"Considerable effort will be needed" for the country to scramble back to a position where it can start to repay the debt, he warned.

"The spiral of debt is nourished by the fact that not only must the charges on the debt be paid, but the year's revenues do not cover the year's expenses," which prompts further borrowing.

The government has forecast that France's public debt — which covers all the money owed by the state, local governments and welfare budgets — will soar to 84 percent of gross domestic product next year and 91 percent by 2013.

The government of President Nicolas Sarkozy has meanwhile unveiled plans for more borrowing — a €35-billion national loan to fund investments aimed at driving growth.

France is among several major economies that have emerged from recession in recent months, but observers have warned of risks to recovery, partly from the debts accumulated by countries in tackling the downturn.

AFP

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