"
We cannot further deteriorate our public finances
."
The warning from the Governor of the Banque de France is solemn.
After the necessary time for "whatever the cost", France must be concerned with cleaning up its accounts, the deterioration of which can be seen in a historically high level of indebtedness now close to 115% of Gross Domestic Product (GDP) .
“
If we extend into the future the current trends which are those of the last ten years – weak potential growth, increase in expenditure in volume of more than 1% per year, deficits still above 3% for several years –, this ratio of debt would only be stabilized at best
,” warns François Villeroy de Galhau.
At best … Because if they materialized, the proposals for new spending and additional tax cuts, which flourish every day in all the presidential camps, would further unbalance public finances, fears the central banker.
“
The reality is that our country does not have the means for either one
[…]
given the likely rise in interest rates
,” he insists.
The long-term problem is not inflation but growth
The next few years promise to be tough because the governor does not give any credibility to the sympathetic idea that growth alone will be able to solve all our problems. Much more than inflation, which he considers temporary, he is worried about the low level of French economic activity. “
Growth today amplified by the catch-up would run out of steam: according to our latest projections, growth in France would fall below 1.5% in 2024
,” he says.
And to advocate a whole
range of reforms to try to increase this potential growth: retirement, professional training, unemployment insurance, strengthening of basic education and apprenticeship...
– both public and private investment is rather high – we are short of work, of available work for employers
”, insists François Villeroy de Galhau.
