France's Debt Reduction: A Balance of Cuts and Taxes

France aims to reduce its budget deficit through a mix of spending cuts and tax increases. The central bank suggests a 75-25 split between savings and higher taxes. Current deficit targets seem unreachable by 2027, prompting a potential revision of plans by the new Prime Minister, Michel Barnier.

France's strategy for reducing its budget deficit must largely focus on spending cuts, with some tax hikes, particularly targeting the wealthy and large corporations, according to French central bank chief Francois Villeroy de Galhau.

In a statement to BFM TV, Villeroy suggested a mix of 75% savings and 25% tax increases to meet the budget deficit target of 3% of GDP. He emphasized that France is currently grappling with excessive deficit and debt, recommending that deficit reduction efforts be extended over a five-year period instead of meeting the 2027 target.

The current budget deficit is targeted at 5.1% of GDP for this year. The new Prime Minister, Michel Barnier, has not yet disclosed his plans regarding the objective to reduce the public sector budget deficit to 3% by 2027 or the methods he will employ to address the country's financial shortfall.

(With inputs from agencies.)