ECB’s Villeroy: No Need for Austerity in France to Return to 3% Deficit by 2029

22 January 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said on Wednesday that the French government did not need to turn to austerity measures to achieve a 3% deficit by 2029 and a stable debt-to-GDP ratio.

In an interview with French daily Le Télégramme, Villeroy, who heads the Banque de France, said that reducing the budget deficit to 3% by 2029 and stabilising debt-to-GDP ratio ‘will require better control of spending, not austerity.’

France’s public spending was the highest in Europe and the world and its yearly increase should be reduced to 0% from last year’s 2% in real terms, he said.

The government’s expected €30 billion savings for 2025 was a high figure as France had ‘drifted a lot in recent years’, he said, but these saving should decline to €15-20 billion annually in following years.

‘It’s something that’s within reach if everyone pitches in’, he added.

The surge seen in French bonds since June meant the country was ‘threatened with a change in status and a loss of credibility in Europe.’

Asked about the government’s new deficit target for 2025 at 5.4%, compared to Michel Barnier’s 5% objective, Villeroy said this figure should remain as close as possible to 5% but below 5.5%.

Achieving Barnier’s initial target ‘has become difficult because growth has been revised downwards and a number of the planned measures can no longer be implemented because of the delay’, he said.