Governor of the Bank of France fears a “Suffocation” of the Country if it Does Not Reduce its Deficit

BUDGET: François Villeroy de Galhau recalls the importance of a budget for 2026 with a public deficit “at a maximum of 5% of GDP” so as not to put himself “in the red zone”, while parliamentarians struggle to agree on a text

The governor of the Bank of France said this Saturday that he feared “a suffocation” from France if it fails to reduce its deficit budgetary, while the country still does not have one budget for 2026 despite intense debates. “France does not risk bankruptcy, but suffocation on several dimensions”, said François Villeroy de Galhau on France Inter. “A budgetary […], economic […] and generational stifling, because we are choosing seniors over young people”, with “more retirement spending and more deficit”, he said. He specifies.

To remedy this, according to him, we must “get away from postures, quarrels, spectacle, and find real compromises”. The governor considered it “very important that there be a budget for 2026” with a public deficit “at a maximum of 5% of GDP” so as not to put ourselves “in the red danger zone”. This requires “stabilizing spending” and “having wisdom on taxes”.

This involves, according to him, recognizing that we no longer have the money to lower them taxes and that there are certain necessary justice measures, such as the extension of the corporate tax surcharge for large companies, on which parliamentarians from the right and the left cannot agree.

Risks of financial crisis?

Even if the financial markets are currently calm vis-à-vis France, “their functioning is never linear, [there] can be an apparent calm then a brutal correction”, observed the governor, in particular “in the current extremely uncertain geopolitical environment.

He also stressed that the American financial deregulation agenda increases the risks of financial crisis “, while calling to “keep calm and our course” in Europe, to “maintain a frank and demanding dialogue across the Atlantic”.

Towards a lowering of the Livret A rate

On the probable drop in the rate of interest of the Livret A, next Thursday, to take into account the drop in inflation, François Villeroy de Galhau simply stated that this rate, currently 1.7%, “will remain significantly higher than inflation” (0.8%). Economists anticipate a drop to 1.3% or 1.4%.

He finally assured that “it’s the right time” for a real estate loan, with rates “on average around 3.1% for a twenty-year loan”. He revealed that, over the first eleven months of 2025, the amounts of credits granted exceeded by 35% those granted from January to November 2024.