ECB’s Villeroy: France Might Need Beyond 2027 to Get Deficit Below 3%

4 September 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Wednesday warned that France might not be able to reduce its deficit to below 3% before 2027.

In an interview with French weekly business magazine Le Point, Villeroy, who heads the Banque de France, said that European fiscal rules were demanding but possible to comply with if France made efforts over time and a realistic timetable was agreed on.

‘[T]hen we will reduce the debt ratio – as all our major European neighbours are already doing – and we will gradually return to a deficit of below 3%’, he said. ‘However, not necessarily as early as 2027: a realistic compromise on the timetable will be needed, compatible with the new European Pact.’

The public budget was a top priority for France, but not the only one, he said. ‘Beyond the budgetary urgency, we need a productive long-term approach’, he said.

‘[T]he burden of public debt is costing us more and more, it has gone from nearly €30 billion in 2020 to more than €80 billion in 2027’, he said.

It would be up to the French Parliament to decide how to achieve the appropriate budget, he said, noting that it would be necessary to reconsider expenditures. 

‘We therefore need a fair and shared effort, on state expenditure, but also on certain social and local expenditure’, he said. ‘It is not a question of reducing them overall – that is not austerity – but of finally slowing down their growth in volume and optimising their efficiency.’

The ECB had no role in aiding individual countries, he said, noting that the treaty ‘even prohibits monetary financing of deficits, rightly so because it is a central element in the success of the fight against inflation.’

Economic growth should not be jeopardised by local political issues, he said.

‘Political difficulties must not be allowed to reinforce a form of economic inertia: France, like the rest of Europe, is seeing its potential growth, i.e. the economy's cruising speed, decline’, he said. ‘It was around 2% a quarter of a century ago and is now tending towards 1%.’