Despite a recent narrow victory on its 2026 Social Security Financing Bill, France remains under intense scrutiny to address its persistent budget deficit and mounting national debt, currently at 113% of GDP [[2]]. Central Bank Governor François Villeroy de Galhau cautioned that the parliamentary vote represents only an initial step toward achieving necessary fiscal consolidation, as the nation aims to reduce its deficit from 5.4% to the Eurozone-mandated 3% within four years. The government’s financial maneuvering comes amid a broader debate over France’s economic trajectory, with some analysts warning of a potential “third-world” economy if reforms are not implemented [[3]].
France’s Central Bank Governor Says Budget Vote Is Just One Step
France’s central bank governor, François Villeroy de Galhau, reacted to the narrow passage of the 2026 Social Security Financing Bill (PLFSS) in the National Assembly, characterizing it as merely “a step taken,” but far from a resolution. The vote comes as the French government faces ongoing pressure to rein in spending and reduce its deficit.
Villeroy de Galhau emphasized the significant challenge of reducing the country’s overall deficit. “We don’t know today if we’re going to be able to lower the total deficit sufficiently,” he said. Currently at 5.4% of France’s gross domestic product, the deficit needs to fall to 3% within four years, requiring a reduction of roughly one-quarter each year. He revealed he has advocated for a deficit of 4.8% next year.
“I believe it remains very important to be as close as possible to that figure of 4.8%,” Villeroy de Galhau stated, citing the need to alleviate the growing burden of debt and restore investor confidence. Rising interest payments on the national debt are increasingly limiting the government’s financial flexibility.
The Banque de France is also preparing to revise its economic growth forecasts for both 2025 and 2026 upward. Previously projecting 0.7% growth for this year and 0.9% for next year, the bank will release updated figures soon. This adjustment follows similar revisions by the INSEE national statistics agency and the government, which now anticipate 0.8% growth in 2025.
Despite the more optimistic outlook, the central bank anticipates a slowdown in growth during the fourth quarter, forecasting a 0.2% increase in GDP compared to 0.5% in the previous quarter. “Even if we were to reach 1% [growth next year], it wouldn’t be enough,” Villeroy de Galhau cautioned, acknowledging the resilience of the French economy despite ongoing political uncertainty. He noted that fears of a recession a year ago have so far been avoided.
