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France’s Central Bank chief says France could undergo economic crisis
(MENAFN) France could encounter a slow-burning economic crisis if it fails to tackle its budget and debt challenges, according to the governor of the Bank of France, Francois Villeroy de Galhau.
In a recent interview, he acknowledged that the country is grappling with a “serious budgetary problem,” as the government deficit remains elevated at 5.4% of GDP in 2025, only a slight improvement from 5.8% last year. Villeroy de Galhau stressed that France must reduce the deficit to 3% by 2029 to regain fiscal credibility.
“Our country is not threatened with bankruptcy, but with gradual suffocation,” he said, highlighting that debt-servicing costs are expected to climb from €30 billion in 2020 to over €100 billion by the decade’s end. He cautioned that rising interest rates are already increasing borrowing costs for households and businesses, diverting funds from crucial priorities such as defense and the green transition.
“Finally, and above all, it is an increasingly heavy debt that we are leaving to our children and grandchildren,” he added. France’s public debt currently stands at €3.3 trillion ($3.9 trillion), roughly 115% of GDP.
Villeroy de Galhau’s warnings follow revisions from credit rating agencies, with one major agency changing France’s sovereign outlook from stable to negative due to political “fragmentation” that could complicate policymaking. Earlier this year, other agencies also downgraded the country’s rating to A+, citing fiscal and political risks.
Despite these challenges, the central bank governor pointed out that France still retains strengths. Moody’s remains the only major agency maintaining a double-A rating for the country, which he described as “a sign that the country retains strengths, even if the outlook is negative.”
He projected modest economic growth of around 0.7% in 2025, emphasizing that France continues to be “the major European country that has created the most jobs over the past ten years.” Unemployment, historically high in France, currently sits at approximately 7.5%.
In a recent interview, he acknowledged that the country is grappling with a “serious budgetary problem,” as the government deficit remains elevated at 5.4% of GDP in 2025, only a slight improvement from 5.8% last year. Villeroy de Galhau stressed that France must reduce the deficit to 3% by 2029 to regain fiscal credibility.
“Our country is not threatened with bankruptcy, but with gradual suffocation,” he said, highlighting that debt-servicing costs are expected to climb from €30 billion in 2020 to over €100 billion by the decade’s end. He cautioned that rising interest rates are already increasing borrowing costs for households and businesses, diverting funds from crucial priorities such as defense and the green transition.
“Finally, and above all, it is an increasingly heavy debt that we are leaving to our children and grandchildren,” he added. France’s public debt currently stands at €3.3 trillion ($3.9 trillion), roughly 115% of GDP.
Villeroy de Galhau’s warnings follow revisions from credit rating agencies, with one major agency changing France’s sovereign outlook from stable to negative due to political “fragmentation” that could complicate policymaking. Earlier this year, other agencies also downgraded the country’s rating to A+, citing fiscal and political risks.
Despite these challenges, the central bank governor pointed out that France still retains strengths. Moody’s remains the only major agency maintaining a double-A rating for the country, which he described as “a sign that the country retains strengths, even if the outlook is negative.”
He projected modest economic growth of around 0.7% in 2025, emphasizing that France continues to be “the major European country that has created the most jobs over the past ten years.” Unemployment, historically high in France, currently sits at approximately 7.5%.
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