Villeroy warns French president against economic limits

Content of the article

(Bloomberg) – Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

The governor of France’s central bank has waded into the economic debate ahead of April’s presidential elections, warning candidates they have little room to promise tax cuts or spending increases and should rather focus on improving labor supply to increase growth potential.

Addressing students at Paris Dauphine University, Francois Villeroy de Galhau said growth prospects have dwindled in recent decades due to a lack of skilled labor, despite relatively high unemployment. and the abundance of public spending and available capital. He called for improvements in education and learning, as well as an overhaul of the country’s pension system.

Advertising

Content of the article

Villeroy said France also needed a combination of measures that would improve training, discourage unemployment benefits and allow wage increases in certain areas that are not attractive to workers. The government should aim to lift potential growth to between 1.5% and 2% from less than 1.5% currently, he said.

“All of these levers on labor supply should add up, not clash in our public debate,” Villeroy said. “They must be pursued with perseverance, rather than remaining ephemeral announcements”,

The central bank governor’s comments come with just three months left before the French go to the polls. Polls currently show Emmanuel Macron, whose supporters tout his economic record, won the first round of voting and faces a runoff against center-right candidate Valérie Pécresse or National Rally leader Marine Le Pen.

Advertising

Content of the article

Macron, who has not officially declared that he will run again, has pledged to spend in recent months, including on police forces, public transport or measures to protect French consumers from rising oil prices. ‘energy.

While Pecresse has pledged to be tougher on reducing the public debt and deficit, she wants to lower inheritance taxes and spend more to support families and education. Le Pen, who once promoted non-repayment of debt as a possibility, has changed course but still has costly proposals including tax cuts and the dismantling of wind turbines.

Still, Villeroy said that beyond additional efforts to improve labor supply, candidates have little leeway to offer voters lower taxes or higher spending. The current trajectory of public spending and economic growth means that France’s debt ratio would at best stabilize in the coming years – a situation that Villeroy says would be unsustainable.

Advertising

Content of the article

“The debt situation should worry us,” he said in an interview with France Info radio on Wednesday, following Paris Dauphine’s speech. “It’s too high because you can’t bet that rates will stay at today’s favorable levels, there may be another crisis, and we have huge needs to invest in the climate transition.”

Villeroy called on France to define a strategy to better control the growth of public spending over the long term, in addition to efforts to stimulate economic growth.

“’Today’s public debate is seeing a proliferation of proposals for new spending and additional tax cuts,’ Villeroy said. “The reality, and it has to be said, is that our country can afford neither.”

©2022 Bloomberg LP

Bloomberg.com

Advertising

comments

Postmedia is committed to maintaining a lively yet civil discussion forum and encourages all readers to share their views on our articles. Comments can take up to an hour to be moderated before appearing on the site. We ask that you keep your comments relevant and respectful. We have enabled email notifications. You will now receive an email if you receive a reply to your comment, if there is an update to a comment thread you follow, or if a user follows you comments. Visit our Community Rules for more information and details on how to adjust your E-mail settings.

Comments are closed.