French central bank governor warns economy is worrying after GDP forecast cut to 0.4%
MacroDigital Finance
Emmanuel Moulin, Governor of the Bank of France and a member of the European Central Bank's Governing Council, said the French economy is in a worrying situation and called on the government and parliament to move quickly to address the budget deficit, amid slowing growth and a rising public debt interest burden. France's national statistics agency cut its forecast for economic growth in 2026 to just 0.4% from 0.7%, after weak consumer spending and lower investment. The government is due to publish revised GDP projections on Friday. The slowdown poses a challenge to the government's plan to reduce the budget deficit this year to 5% of GDP from 5.1% in 2025, and the spread between 10-year French government bonds and German government bonds rose above 90 basis points early in the week, the highest level since the European sovereign debt crisis. Moulin warned that the government's interest costs will rise in line with interest rates, and that France could end up paying as much as nearly 100 billion euros a year in interest on its debt by 2028 or 2029. He also criticised Jean-Luc Mélenchon's proposal to cancel debt held by the Bank of France and the European Central Bank, calling it an illegal, dangerous and pointless approach. Christine Lagarde, President of the European Central Bank, rejected the idea as legally impossible and financially dangerous.
