The aid deployed by the government to fight inflation must remain "
temporary and targeted
" in a context of already high indebtedness, warned the governor of the Banque de France on Thursday, recalling the role of the European Central Bank (ECB) to control rising prices.
Government measures have a "
significant budgetary cost
" and they "
should remain temporary and targeted as much as possible
", affirms François Villeroy de Galhau, in his traditional "
letter to the president
", sent as every year to the presidents of the Republic, the National Assembly and the Senate, entitled this year “
How to reduce inflation?
".
First of external origin - the rise in the prices of energy and raw materials -, inflation, which reached 6.5% in June in France on the basis of the HICP index used to compare countries Europeans, is now "
internal
", since inflation excluding energy and food also reached 3.3% in France (3.7% in the euro zone), notes François Villeroy de Galhau in his letter.
This situation has led the ECB to begin the "
normalization
" of its monetary policy, with interest rate hikes planned for the coming months to bring inflation back to around 2% in 2024, the governor recalls.
"
In the absence of a new energy shock, the normalization phase will not cause a recession, the real rates - deducting expected inflation - remaining very favourable
”, wants to reassure the governor.
Read also“People are there”: faced with inflation, the French are more than ever hunting for bargains
"Strengthening our productive capacity"
"
On the public debt side, however, the illusion of costless and limitless spending is over
", he adds, believing that France "
must regain control of its public debt
", while the public debt reached 112.5% at the end of 2021. The economic shock resulting from the war in Ukraine “
does not justify a new
“
whatever the cost
””, in the face of the “
limited decrease
” in corporate margins and the “
slowdown for a time
of the purchasing power of households, insists the governor, who underlines the need to ensure the fate of the most disadvantaged households.
In order to support growth and reduce inflation, he advocates measures to “
strengthen our productive capacity
”, rather than policies to support demand.
In addition to the ecological and digital transition, France's particular "
challenge
" is also to increase "
the supply of work
", he notes, by accelerating learning and having "
more seniors in work
” with “
a fair pension reform, and a real commitment from employers
”.
