France’s Central Bank Governor, Francois Villeroy de Galhau, has issued a stark warning about the nation’s economic outlook. In an interview with La Croix, he described the country as facing an ‘economic suffocation’ due to persistent budgetary and debt challenges. The governor stressed that France must reduce its deficit from 5.4% of GDP in 2025 to 3% by 2029 to stabilize its fiscal credibility. He emphasized that while France is not at risk of bankruptcy, the rising debt-servicing costs, projected to increase from €30 billion in 2020 to over €100 billion by the end of the decade, pose a significant threat to economic stability.
The growing debt burden, currently at €3.3 trillion or 115% of GDP, is a major concern for Villeroy de Galhau. He pointed out that higher interest rates are exacerbating the problem, pushing up borrowing costs for both households and businesses, and diverting funds away from critical sectors such as defense and the green transition. His comments align with recent downgrades from credit rating agencies, including Moody’s, which shifted France’s sovereign outlook from stable to negative, citing political fragmentation as a key concern. Villeroy de Galhau expressed confidence in France’s economic resilience, forecasting modest growth of around 0.7% for 2025 and noting the country’s success in creating jobs over the past decade, despite persistently high unemployment at 7.5%.