France is facing a significant economic challenge, with its governor of the Bank of France, Francois Villeroy de Galhau, warning of a risk of gradual “suffocation” due to the country’s budget and debt problems. In an interview with La Croix, Villeroy de Galhau acknowledged that France has a “serious budgetary problem,” with a government deficit of 5.4% of GDP in 2025, only slightly improved from 5.8% last year. He emphasized the need to reduce the shortfall to 3% by 2029 to restore fiscal credibility.

The country’s debt-servicing costs are projected to rise from €30 billion in 2020 to over €100 billion by the end of the decade, which is more than three times the current amount. Villeroy de Galhau noted that higher interest rates are already increasing borrowing costs for households and businesses, while diverting funds from priorities such as defense and the green transition. France’s public debt has reached €3.3 trillion, or approximately 115% of its GDP, which is a significant burden on future generations.

The warning comes after Moody’s credit rating agency revised France’s sovereign outlook from stable to negative, citing political “fragmentation” that could hinder policymaking. Other credit rating agencies, such as Fitch Ratings and S&P Global Ratings, have also downgraded France’s credit rating to A+, flagging fiscal and political risks. Despite this, Villeroy de Galhau maintained a forecast for modest growth of around 0.7% in 2025, noting that France remains a major European country that has created a significant number of jobs over the past decade.

The governor’s comments highlight the need for France to address its budget and debt problems to avoid a gradual economic decline. With unemployment currently at around 7.5%, the country must find a balance between reducing its deficit and supporting economic growth. The French government faces a significant challenge in restoring fiscal credibility and ensuring the long-term sustainability of its economy. As Villeroy de Galhau emphasized, the country’s increasing debt is a burden that will be left to future generations, making it essential to take action to address these issues.