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French official warns on public spending as debts rack up

Lucy Harley-McKeown
·2-min read
Governor of the Bank of France Francois Villeroy de Galhau attends a news conference at the G7 finance ministers and central bank governors meeting in Chantilly, near Paris, France, July 18, 2019.  REUTERS/Pascal Rossignol
Governor of the Bank of France Francois Villeroy de Galhau attends a news conference at the G7 finance ministers and central bank governors meeting in Chantilly, near Paris, France, July 18, 2019. Francois Villeroy de Galhau told France Inter radio station that public spending had reached dangerous levels. Photo: REUTERS/Pascal Rossignol

France’s top central banker has said the country needs to get a handle on its spending, as it takes measures to deal with the fallout of the COVID-19 pandemic.

Francois Villeroy de Galhau told France Inter radio station that public spending had reached dangerous levels.

According to a report from Reuters, France’s public spending has grown at a rate of 1% in real terms over the past decade

Villeroy de Galhau said: “There's a real alert and it is time to regain control (over public spending)."

“We can’t afford everything all the time.”

Europe’s third largest economy introduced a €100bn (£90.6bn, $117bn) stimulus package last month, a sum equal to 4% of the country’s gross domestic product (GDP).

France is ploughing proportionally more public cash into its economy than any other big European country.

"There is a justified debt which is the COVID debt, there is a dangerous debt which is the one under which we would live beyond our means for a long time," Villeroy said.

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The UK’s public spending has also been brought into question this week, as bills have mounted during the pandemic.

Experts recently warned that government officials would have to choose between more austerity and permanently higher spending in the months to come.

The Institute for Fiscal Studies (IFS) said COVID-19 has meant that public spend is likely to rise to the highest share of national income in more than a decade.

If it doesn’t rise, another bout of austerity is on the cards for public services, it warned.

The think tank also said the UK had been through the most prolonged squeeze in public spending on record. Despite this, even on the eve of the pandemic, UK public spend was around 39.8% of national income. These are the same levels seen in 2007-08.