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(Bloomberg) — Bank of France Governor Francois Villeroy de Galhau said it\u2019s urgent for the country to deal with its deficit and debt challenges as bond markets are increasingly sending warnings about the risks.<\/p>\n
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\u201cIn recent days, international lenders, those who lend to France, are also telling us we must now react,\u201d he said on France 2 television on Wednesday. \u201cBefore June, we had an interest-rate spread with Germany of around 0.5 percentage points, and now we are close to 0.8, so we really must deal with this sickness.\u201d<\/p>\n
The French government is under pressure to find quick solutions to the country\u2019s fiscal challenges and must present a budget bill for 2025 to parliament in the coming weeks. Prime Minister Michel Barnier indicated on Sunday that he will make the country\u2019s biggest companies and wealthiest individuals pay more tax in an effort to tackle the massive budget deficit \u2014 an approach Villeroy has backed.<\/p>\n
\u201cWhen a family is living beyond its means, which is France\u2019s case, you can cut spending or raise revenues,\u201d Villeroy said. \u201cToday, we need to do a both \u2014 we need a well-proportioned cocktail.\u201d<\/p>\n
He said savings should account for three quarters of the effort. The central banker added that France is in a \u201crelatively favorable\u201d situation for fiscal consolidation because inflation is easing, real incomes are improving and interest rates are falling.<\/p>\n
\u201cFor 40 years, we\u2019ve been saying it isn\u2019t the moment and that we mustn\u2019t break growth \u2014 the result is that public debt is getting out of hand,\u201d Villeroy said. He added that France will soon be the only country in Europe unable to bring its deficit within the European Union ceiling of 3% of economic output.<\/p>\n
In an unexpected bright spot for Prime Minister Michel Barnier\u2019s new government, data from statistics agency Insee on Wednesday showed that French consumer confidence rose in September to the highest level since February 2022, the month that Russia invaded Ukraine. The reading was higher than any economist estimate.<\/p>\n
Insee said earlier this month that France\u2019s economic growth will be modest on average in the second half of the year as consumer demand picks up only slightly and businesses rattled by political uncertainty continue to hold back on investment.<\/p>\n
(Updates with consumer confidence in seventh paragraph.)<\/p>\n
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