France’s budget deficit is expected to increase significantly in the coming years, prompting the government to tighten its belt, warned the president of the French central bank. François Villeroy de Galhau expressed his concerns in an interview with the French radio station Franceinfo, citing the results of the parliamentary elections as a particular worry. The victorious left-wing alliance is expected to substantially increase public spending.
This increased spending could further inflate the budget deficit. Last year, France’s deficit was already 5.5 percent of its gross domestic product (GDP), which represents the total value of goods and services produced in the country. This year, the deficit is projected to be 5 percent, with potential for further increase. According to European Union regulations, member states are required to limit their budget deficits to a maximum of 3 percent of GDP.
Bloomberg reports that France would need to cut spending by 15 billion euros annually in the coming years to comply with EU guidelines. This estimate is based on correspondence between the French government and the European Commission.
Villeroy de Galhau also expressed doubts about the left-wing alliance’s plans to raise corporate taxes, increase the minimum wage, and lower the retirement age, arguing that these measures could harm France’s competitive position.
Earlier, major credit rating agencies such as Moody’s and S&P Global had already voiced concerns about the impact of the election results on France’s public finances.