A crash is coming and France isn’t doing enough to stop it, top economist warns

 

A crash is coming and France isn’t doing enough to stop it, top economist warns

 

Olivier Blanchard told POLITICO that the country is “absolutely not doing what is needed” to get its finances in order.

Economist Olivier Blanchard said successive French governments have brought the French economy to a dangerous point. |

 

January 17, 2025 1:32 pm CET

By Giorgio Leali

https://www.politico.eu/article/crash-is-coming-and-france-is-doing-nothing-top-economist-says/

 

PARIS — France is hurtling toward an economic crisis and must get its finances in check to stop it, one of the world's most respected economists said.

 

Olivier Blanchard, a former chief economist for the International Monetary Fund, told POLITICO that successive governments have brought France to a dangerous point by failing to make politically unpalatable decisions to balance its budget.

 

"We are absolutely not doing what is needed, that's for sure," Blanchard said.

 

Blanchard, who is back in France after a 50-year career at the Massachusetts Institute of Technology, said that while a market crash isn't imminent, he sees one on the horizon.

 

France entered the new year for the first time in its modern history without a proper budget after lawmakers ousted Prime Minister Michel Barnier in opposition to his plans to bring down the country's massive budget deficit, which came in at 6.2 percent of gross domestic product last year.

 

Barnier's successor, François Bayrou, is also prioritizing deficit reduction, but has put forward slightly less ambitious tax hikes and spending cuts to get more lawmakers on board.

 

 

Blanchard said that Bayrou's government "has done more or less its best, but its best is not much, and is not sufficient." He added that the current gridlock, in which no political group holds a majority in parliament, isn't helping.

 

"For now, French parties are not ready to accept something that is necessary," Blanchard said. "It will take a budget crisis, maybe a financial crisis, for parties to sit down and say we're going to do something."

 

Blanchard added that he does not think Brussels, which put France under an excessive deficit procedure for overspending in 2023, has the power to push the country in the right direction.

 

"Brussels doesn't have the practical tools to force France to make a bigger effort, only markets can do that," he said.