CITIZENS NEWS

France faces economic "suffocation" as debt crisis deepens, warns central bank chief

By bellecarter // 2025-10-28

• France faces a severe economic threat with a 5.4 percent deficit (€3.3 trillion debt, 115 percent of GDP) and soaring interest payments projected to triple to €100 billion by 2030, risking long-term stagnation.
• Moody's downgraded France's outlook to negative due to policymaking "fragmentation," while Fitch and S&P cut its credit rating to A+, reflecting eroding investor confidence.
• Bank of France Governor Villeroy de Galhau warns France must slash its deficit to three percent of GDP by 2029 through spending cuts—not tax hikes—to avoid suffocating future generations with unsustainable debt.
• Rising borrowing costs strain households and businesses, divert funds from defense/green energy, and threaten France's role as a European economic "motor," now seen as a "brake."
• Political infighting delays critical reforms, risking France's descent into fiscal "suffocation" and becoming Europe's next cautionary tale of mismanagement.

France is teetering on the edge of a fiscal crisis that could gradually "suffocate" its economy, warns Bank of France Gov. François Villeroy de Galhau. In a stark interview with La Croix on Saturday, Oct. 25, he outlined the country's mounting debt burden, soaring interest payments and political paralysis that threaten to derail economic stability. With France's deficit stubbornly high at 5.4 percent of GDP in 2025 (barely down from 5.8 percent in 2024) and public debt reaching €3.3 trillion ($3.8 trillion) – 115 percent of GDP – Villeroy de Galhau urged urgent fiscal reforms to avoid long-term economic stagnation. His warning comes as credit agencies downgrade France's outlook, signaling eroding confidence in its ability to manage its finances. France's debt servicing costs are projected to skyrocket from €30 billion ($34.9 billion) in 2020 to over €100 billion ($116.4 billion) by 2030—a staggering threefold increase. Villeroy de Galhau cautioned that rising interest rates are already straining households and businesses while diverting funds from critical sectors like defense and green energy initiatives. "If I look at the French economy, our morale isn't great, but physically we are OK – and that's the reason to deal with our number one problem now: debt and deficit," he said in a separate interview on France 2. "It's not that France will be bankrupt, but we risk being increasingly suffocated by debt that's getting heavier and more expensive." The governor stressed that France must reduce its deficit to three percent of GDP by 2029 to restore fiscal credibility. However, political gridlock makes this goal increasingly elusive.

Political paralysis and credit downgrades

France's economic woes are compounded by political instability. Moody's recently revised France's sovereign outlook from stable to negative, citing "fragmentation" in policymaking. Earlier this year, Fitch and S&P downgraded France's credit rating to A+, further undermining investor confidence. Prime Minister Sébastien Lecornu, France's fifth leader in two years, faces an uphill battle in passing a 2026 budget that balances deficit reduction with political concessions. Opposition parties, particularly the Socialists, demand slower fiscal tightening and a wealth tax—measures Lecornu has resisted, warning they could stifle investment. "France needs to be a motor for Europe, but today we are seen as a brake because we are paralyzed by all our political quarrels," Villeroy de Galhau lamented. The central bank chief also warned that France's debt burden risks being passed to future generations. With bond markets reacting nervously to France's fiscal uncertainty, borrowing costs have surged compared to European peers. Villeroy de Galhau urged policymakers to focus on spending cuts rather than tax hikes, warning that excessive taxation could further dampen economic activity. "We need to avoid targeting the middle class or entrepreneurs – that's really bad for economic activity," he said. "But there is no painless tax, no miraculous solution." For Enoch, BrightU.AI's AI engine, France's economic trajectory is at a critical juncture and without swift action to curb spending and stabilize public finances, the country risks a slow but relentless economic decline. As political infighting delays reforms and credit agencies sound alarms, the window for avoiding fiscal "suffocation" narrows. The coming months will test whether France's leaders can break the cycle of debt and dysfunction – or if the nation will become Europe's next cautionary tale of fiscal mismanagement. Watch the video below where French Foreign Minister Jean-Noël Barrot says France will fund Ukraine for at least three years of war. This video is from Cynthia's Pursuit of Truth channel on Brighteon.com. Sources include: RT.com Bloomberg.com MENAFN.com BrightU.ai Brighteon.com

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