France Pushes for European Economic Sovereignty Amidst Domestic Economic Challenges
François Villeroy de Galhau calls for European economic sovereignty while addressing France's economic challenges.
Key Points
- • Governor Villeroy emphasizes the need for European economic sovereignty.
- • Purchasing power is rising but consumer spending is recovering slowly.
- • Public debt is projected to reach 5.4% of GDP, necessitating a budget cut by 2029.
- • Tax reforms, including a wealth tax, are under scrutiny for potential economic impact.
In a recent interview, François Villeroy de Galhau, the Governor of the Bank of France, made significant remarks regarding France's economic situation and the broader context of European economic sovereignty. He emphasized the urgent need for Europe to actively pursue its economic independence, stating that it is time for the continent to 'leave the sidelines' and take decisive action in the realm of economic policy.
Villeroy indicated that France is experiencing a slight improvement in purchasing power, with anticipated inflation rates of just 1% for the year, as reported by INSEE. He noted that while salaries are beginning to rise faster than consumer prices, many citizens are still feeling the pinch from previous increases in essential goods. Despite the favorable inflation projection, consumer spending recovery remains sluggish, primarily due to high savings rates amid ongoing economic uncertainty.
“Consumer spending is recovering only gradually,” he remarked, highlighting that household savings have elevated as citizens remain cautious in their spending habits. Although business margins have reached historic highs, largely due to governmental support during the COVID-19 pandemic, overall economic growth has stagnated at around 0.1% for the second quarter of 2025.
In terms of fiscal responsibility, Villeroy raised concerns about rising public debt, which is expected to reach 5.4% of GDP. He called for France to stabilize its budget deficit, aiming for a reduction to below 3% by 2029. Villeroy pointed out that the necessary budgetary adjustments would ensure the sustainability of public services, which currently exceed those of other European nations.
The Governor also discussed potential discussions surrounding tax reforms, including a proposed wealth tax. However, he cautioned against potential adverse effects that such measures might have on the economy, advocating for a more cautious approach.
Villeroy concluded with an affirmation of the Bank of France’s commitment to ensuring cash accessibility as a fundamental right, signaling that the Bank remains vigilant in navigating the country towards a more stable economic future while advocating for Europe’s economic sovereignty through strategic investments in finance, AI, and energy decarbonization.