By the end of the decade, France’s interest payments are projected to more than triple, according to Francois Villeroy de Galhau.
The governor of the Bank of France has cautioned that France faces potential gradual economic “suffocation” if it fails to tackle its budgetary and debt issues.
Speaking to La Croix on Saturday, Francois Villeroy de Galhau conceded that France confronts a “serious budgetary problem,” with the government deficit projected at a high 5.4% of GDP in 2025, a minor improvement from last year’s 5.8%. He stressed the necessity for France to reduce this deficit to 3% by 2029 to re-establish fiscal credibility.
Villeroy de Galhau stated, “Our country faces the threat not of bankruptcy, but of gradual suffocation,” highlighting that debt-servicing costs are forecast to surge from €30 billion in 2020 to over €100 billion by decade’s end. He cautioned that elevated interest rates are already increasing borrowing expenses for both households and businesses, simultaneously diverting essential funds from areas like defense and the green transition.
“Ultimately, and most importantly, it is an ever-growing burden of debt that we are passing on to our children and grandchildren,” he remarked. France’s current public debt stands at €3.3 trillion ($3.9 trillion), approximately 115% of its GDP.
These remarks followed Moody’s credit rating agency’s decision to shift France’s sovereign outlook from stable to negative, attributing this to political “fragmentation” that could impede effective policymaking. Prior to this, Fitch Ratings and S&P Global Ratings had both lowered France’s credit rating to A+, similarly citing fiscal and political uncertainties.
Villeroy de Galhau noted that Moody’s remains the sole major agency to assign France a double-A rating, characterizing this as “an indication that the country maintains strengths, despite the negative outlook.”
He upheld a forecast of modest growth, approximately 0.7%, for 2025, observing that France continues to be “the leading European nation for job creation over the last decade.” Unemployment in France, historically elevated, is currently approximately 7.5%.