ECB’s Villeroy: Delta Variant Not the Main Threat to the French Economy

15 July 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said Thursday that the delta variant of the coronavirus was not the main risk to the French economy, but rather that the insufficiency of labour was.

In an interview on French radio network France info, Villeroy, who heads Banque de France, limited his remarks about the outcome of the ECB’s strategy review to the decision ‘to do our bit to combat climate change.’

‘Believe me, the European Central Bank and the Banque de France will be pioneers on a global scale’, he enthused. ‘This is really a subject where Europe is ahead, and it is important to say so. People always say "Europe is lagging behind the United States and China" - on the climate transition, thanks to the Central Bank, thanks to the European Commission yesterday, Europe has the chance to be ahead.’

Although the Banque de France continues to expect French growth of 5.75% this year, the French government’s projection of 6% is not infeasible, he said. In general, the Banque de France expects 10% growth over the course of the rebound to take place this year and next, he said.

The Banque de France’s view of the French economy ‘starts with good news, a very strong rebound following, it seems to us, a management of the crisis which was globally the right one in France and in Europe,’, he said.

As for risks, ‘[t]he delta variant is not the main threat, it must be said’, he said, given that ‘each wave has had less and less economic impact. We have to remain vigilant, of course, but the key is vaccination.’

Although there are supply constraints, these would prove temporary, he said. ‘To tell the truth, the main threat to the recovery seems to us to be the recruitment difficulties of companies’, he said. ‘And here we find what is unfortunately the main French difficulty: it is the insufficiency of the available labour supply, and therefore there is no more essential reform in our country than that which increases this labour supply in quantity and quality.’

Indeed, he said, the French economy does not require more spending or even more investment, he said, but rather the right investment to address the insufficiency of labour.