France faces risk of gradual economic ‘suffocation’

(MENAFN) The governor of the Bank of France, François Villeroy de Galhau, has cautioned that the nation could face gradual economic “suffocation” unless decisive measures are taken to tackle its budgetary and debt issues.

In a Saturday interview, Villeroy de Galhau stressed that France continues to confront a “serious budgetary problem,” with the government deficit remaining elevated at 5.4% of GDP in 2025, only slightly improved from 5.8% the previous year. He emphasized the need to reduce the deficit to 3% by 2029 to restore fiscal credibility.

“Our country is not threatened with bankruptcy, but with gradual suffocation,” he said, noting that debt-servicing costs are expected to soar from $33 billion in 2020 to over $110 billion by the end of the decade. He warned that rising interest rates are already driving up borrowing costs for households and businesses while diverting funds from critical priorities such as defense and the green transition.

“Above all, it is an increasingly heavy debt that we are leaving to our children and grandchildren,” he added. France’s public debt currently totals approximately $3.9 trillion, around 115% of GDP.

His remarks came after Moody’s revised France’s sovereign outlook from stable to negative, citing political fragmentation that could hamper policy implementation. Earlier this year, both Fitch Ratings and S&P Global Ratings downgraded France’s credit rating to A+, highlighting similar fiscal and political risks. Villeroy de Galhau noted that Moody’s remains the only major agency to assign France a double-A rating, suggesting the country retains underlying strengths despite the negative outlook.

He projected modest growth of around 0.7% for 2025 and pointed out that France has been the leading European nation in job creation over the past decade. Unemployment, historically high, currently stands at approximately 7.5%.

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