The level of growth in French public spending has reached an alert level, even taking into account the support plan adopted in response to the coronavirus crisis, the Governor of the Banque de France warned on Saturday.
He sounds the alarm bell. The level of growth of French public spending has reached an alert level, even taking into account the support plan adopted in response to the coronavirus crisis, the Governor of the Banque de France warned on Saturday. “There is a real alert. We must regain control (of public spending),” said François Villeroy de Galhau on France Inter.
“We cannot afford everything, all the time,” he insisted, recalling that public spending in France has increased “by 1% on average, after inflation” over the past ten years. Today, “non-Covid spending is increasing even faster than before, than 1%”, warned the Governor of the Banque de France, citing a study by the High Council of Public Finance. France unveiled a support plan of 100 billion euros last month, which corresponds to 4% of gross domestic product (GDP).
“There is a dangerous debt”
Villeroy de Galhau underlined that France has a level of public spending “already higher than that of our neighbors while we have the same social level”, which according to him reflects an efficiency problem. “There is a justified debt which is the Covid debt, there is a dangerous debt which is one where we would live permanently beyond our means”, he insisted.
The Governor of the Banque de France recalled the risk posed by a lasting slippage in public spending on borrowing rates, a significant increase in which would make French debt more and more expensive to repay, or even in an extreme case the impossibility for France to continue to borrow on the markets. The rating agency S&P on Friday confirmed France’s sovereign rating and maintained a stable outlook, arguing that “recent government economic, fiscal and structural reforms have improved the economy’s ability to weather the current temporary shock.”