The governor of the Bank of France (BdF), François Villeroy de Galhau, stated this Thursday, 27th, that for the State Budget for 2026 to be credible, the deficit limit would have to be 4.8% of the Gross Domestic Product (GDP).
“I have always said that France is not at risk of going bankrupt, but rather of progressive drowning” due to the deficit, said Villeroy de Galhau, in an interview with broadcaster France Info, at a time of great uncertainty about the possibility of Parliament adopting next year’s Budget or not.
“We absolutely need to get out of this progressive drowning and reach a deficit of 3% in 2029. It’s not just because of European commitments, it’s the level that allows us to stabilize our debt”, he explained.
He added that to reach 3% in 2029, and taking into account that it is expected to reach 5.4% in 2025, “it is necessary to make a quarter of the effort in the first year”, which means that “the credibility threshold for 2026 is a maximum deficit of 4.8%”.
In the initial Budget project, the Government intended to leave the deficit at 4.7%, but during the first reading parliamentary debate in the National Assembly, amendments were adopted that implied a deficit of 5%.
The amended budget text, however, was rejected by deputies, so the Senate began debating the executive’s initial version.
The BdF governor repeated that it is necessary to reduce the deficit to prevent the debt from continuing to rise, because the interest to finance it represents “tens of billions of euros” and the number is increasing.
Specifically, he specified that if in 2020 France had to pay 30,000 million euros in interest, it will be “more than 100,000 million at the end of the decade”.
Asked about the socialist proposal to impose on the rich a loan to the State with 0% interest, an idea rejected by the Government, Villeroy de Galhau did not want to enter into a direct discussion, but said that many proposals for new taxes are emerging.
“It gives the impression that every day a rabbit comes out of a hat”, he lamented before adding that “the French deserve a more serious discussion”.
He admitted that some selective measures can be taken, but given the situation of public accounts and the high level of public spending in France, “there is not much room to increase taxes and we don’t have the money to lower them”.
The BdF governor recalled that France has “the same social model” as its European partners and, however, its public spending is nine percentage points of GDP higher, which is equivalent to 280,000 million euros per year. Hence Galhau concludes that “there are ways to improve the effectiveness” of public spending.