PARIS (Reuters) – Rising interest rates reinforce the need to reduce public debt in France to a level below that recorded during the COVID-19 pandemic, Banque de France Governor François Villeroy said on Tuesday. by Galhau.
France has borrowed massively to deal with the consequences of the COVID-19 pandemic on its economy, increasing the amount of its public debt from just under 100% of gross domestic product (GDP) in 2019 to almost 113 % at the end of 2021.
The issue of public debt “was far from dominating” the French presidential campaign last month, said François Villeroy de Galhau.
And it could be the same for the legislative elections which will take place on June 12 and 19 when the left union agreement provides for retirement at 60 (against 62 at present).
François Villeroy de Galhau told a conference of the High Council of Public Finances that too many French people consider that the debt “would have become without limits and without cost” after the massive increase in spending during the pandemic and with the prospect of more in sharper relief from rate hikes by the European Central Bank in the face of soaring inflation.
“Our Governing Council will act as necessary to fulfill our priority mandate of price stability; have no doubt about that,” said Francois Villeroy de Galhau, also a member of the ECB.
“It is therefore all the more important for the budgetary authorities to ensure debt sustainability in the context of rising rates,” he added.
The Banque de France estimates that each 1% increase in interest rates represents an additional cost of nearly 40 billion euros per year after ten years, or almost the current defense budget.
To help bring public debt below 100% of GDP within ten years, François Villeroy de Galhau recommends a lower increase in spending in volumes, to 0.5% per year against more than 1% observed during the previous decade. .
(Report Leigh Thomas, French version Laetitia Volga, edited by Jean-Michel Bélot)
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