France's Budget Deficit: Can it be Reduced to 3% in Five Years?

The Bank of France head, Francois Villeroy de Galhau, stated that reducing France's budget deficit to 3% of GDP within three years is unrealistic, but achievable in five years with the right actions. Factors include potential tax hikes, spending cuts, and navigating a hung parliament. Consumer confidence has slightly improved.

France's Bank head Francois Villeroy de Galhau said on Wednesday that lowering the country's deficit to 3% of GDP within three years is unrealistic, but a five-year timeline is feasible with strategic measures.

Villeroy, also a European Central Bank policymaker, mentioned support for both tax hikes on the wealthy and spending cuts. Prime Minister Michel Barnier echoed these sentiments as France grapples with a significant budget deficit, projected at 5.1% of GDP for 2024—far above the EU's 3% limit.

Despite political hurdles, such as an unruly hung parliament, consumer confidence has improved for the third consecutive month, according to INSEE data. However, investor concerns remain evident with France's borrowing costs surpassing those of Spain for the first time since 2008.

(With inputs from agencies.)