(Bloomberg) -- France’s central bank governor, Francois Villeroy de Galhau, called for more certainty around plans to repair the country’s finances as the government struggles to get the budget through parliament.
“Investors who lend to France and French people themselves, both households and companies, expect clarity and confidence on how we will reduce our deficits and control our public debt,” he said at the Investir Day conference in Paris on Tuesday.
He said confusion would lead to higher borrowing costs and that “the more there is uncertainty instead of confidence, the more businesses and small firms risk delaying investment and hiring.”
France’s capacity to narrow a deficit that is set to swell to 6.1% of economic output this year is in doubt as Prime Minister Michel Barnier’s administration is at risk of being evicted from power by a fragmented parliament.
Investors have already responded to the uncertainty by selling French assets, driving up the country’s borrowing costs compared with European peers.
Villeroy warned that France’s debt servicing expenses are on track to surpass the annual budgets for defense this year and education in 2025. To stop building up the debt burden, he said it’s crucial to get the deficit within 3% of economic output.
“We must absolutely take back control of our public finances,” he added.
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