France’s Central Bank chief warns of economic ‘suffocation’

The country will have to pay over three times more in interest payments by the end of the decade, Francois Villeroy de Galhau has said

France is at risk of gradual economic “suffocation” unless it addresses its budget and debt problems, the governor of the Bank of France has warned.

In an interview with La Croix on Saturday, Francois Villeroy de Galhau acknowledged that France is facing a “serious budgetary problem,” as the government deficit remains high at 5.4% of GDP in 2025, only slightly improved from 5.8% last year. He said France must bring the shortfall down to 3% by 2029 to restore fiscal credibility.

“Our country is not threatened with bankruptcy, but with gradual suffocation,” Villeroy de Galhau said, pointing to debt-servicing costs projected to rise from €30 billion in 2020 to more than €100 billion by the end of the decade. He warned that higher interest rates are already pushing up borrowing costs for households and businesses while diverting funds from priorities such as defense and the green transition.

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“Finally, and above all, it is an increasingly heavy debt that we are leaving to our children and grandchildren,” he said. France’s public debt is now at €3.3 trillion ($3.9 trillion), or about 115% of its GDP.

His comments came after Moody’s credit rating agency revised France’s sovereign outlook from stable to negative, citing political “fragmentation” that could hinder policymaking. Earlier this year, both Fitch Ratings and S&P Global Ratings downgraded France’s credit rating to A+, also flagging fiscal and political risks.

Villeroy de Galhau said Moody’s is now the only major agency that still grants France a double-A rating, describing it as “a sign that the country retains strengths, even if the outlook is negative.”

He maintained a forecast for modest growth of around 0.7% in 2025, noting that France remains “the major European country that has created the most jobs over the past ten years.” Unemployment in France, which has traditionally been high, is currently at about 7.5%.