French Central Bank Issues Warning on Budget Deficit Risks

The Governor of the Bank of France, François Villeroy de Galhau, has issued a stark warning regarding the nation's budget deficit, stating that France risks facing "financial and economic suffocation" if it does not reduce the deficit to 5% or lower this year.

In a radio interview on Saturday, Villeroy de Galhau emphasized that maintaining the current deficit levels would jeopardize the state’s financial health across various sectors, affecting both the economy and future generations. He highlighted the need for the government to balance its support for both the elderly and the youth, noting that the existing pension system places a significant burden on younger citizens. He remarked, "We cannot continue like this."

The central bank governor pointed out that many neighboring European nations have successfully reduced their budget deficits. He urged the French parliament to work towards a compromise that would facilitate the adoption of the 2026 budget and promote deficit reduction through careful spending management and prudent tax policies.

Recently, discussions in the French parliament regarding the draft state budget for 2026 resumed. The original plan aimed to lower the deficit to 4.7% of GDP through measures such as tax increases and freezing pensions and social benefits. However, these proposals were withdrawn after numerous amendments, and the parliament failed to reach a consensus in December 2025. This led President Emmanuel Macron to enact a temporary law to ensure ongoing funding for public institutions.

The revised budget draft is scheduled to be presented to parliament again on January 13, following a review by the finance committee, with hopes of reaching a compromise that satisfies both the House of Representatives and the Senate.