French PM outlines dire outlook of economic situation since taking office
Date
10/9/2024 4:19:28 AM
(MENAFN) Michel Barnier has painted a grim picture of France’s economic situation since taking office as Prime Minister. Each time he discusses the general budget, the outlook appears dire. On September 18, Barnier revealed that the budgetary situation he encountered was so alarming that he had to reassure both Brussels and financial markets, according to a French magazine.
Barnier had already outlined his general policy and his plan to address the crisis. To tackle this challenge, he needs to find 60 billion euros to bring the public deficit down to 5 percent of GDP by 2025. He justified this approach by warning of an impending financial crisis, stating last Friday, “It is ahead of us, and we must be cautious.”
The magazine compared the current situation in France to Italy's crisis in 2011 when Mario Monti hastily formed a government and implemented austerity measures to stabilize the country. However, while there are parallels, the context is significantly different. In 2011, Europe faced the aftermath of the Greek crisis, which spread across the eurozone, affecting Ireland, Portugal, Cyprus, Italy, and Spain in sequence.
Economist Henri Sterdinak noted that during the Greek crisis, markets suffered losses due to contagion effects. By contrast, in 2024, Europe has not experienced major external shocks like the war in Ukraine or the COVID-19 pandemic. Despite this, France has continued to let its deficit and debt rise, unlike Italy in 2011. France, however, has not been penalized by the markets, with its price gap with Germany at 0.80 percent, much lower than Italy's 6 percent at the time. Economist David Cayla argues that Barnier is over-dramatizing the situation, emphasizing that a public debt issue does not automatically translate into a financial crisis.
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