Bank of France Governor Villeroy Warns About Government Spending

(Bloomberg) — Bank of France Governor and European Central Bank policy maker Francois Villeroy Galhau said the French government must be more careful about spending and debt that’s not linked to the novel coronavirus health-care crisis.

© Photographer: Kiran Ridley/Getty Images Europe
PARIS, FRANCE – SEPTEMBER 28: A worker at a Paris bar sweeps up after closing early to comply with new Covid-19 restrictions forcing bars and cafes in the French capital to close at 10pm on September 28, 2020 in Paris, France. The French capital has seen a surge in Covid-19 cases and was recently designated a “red zone,” which imposes set of restrictions on public gatherings and the sale of alcohol. From today bars are required to remain closed between 10PM and 6AM. (Photo by Kiran Ridley/Getty Images)

The government must become “more efficient” as the pace of spending, stripping off Covid-19 measures, has been accelerating too quickly, the Bank of France governor said in an interview on France Inter radio on Saturday.

When the French government locked down the country’s economy in an effort to contain the spread of the coronavirus in the spring, President Emmanuel Macron pledged to support firms and workers “whatever the cost.”

Sticking to that promise has meant a surge in spending at the same time as the economy has collapsed. According to the government’s latest projections, public debt will jump to more than 117% of economic output this year from 98% in 2019.

© Photographer: Kiran Ridley/Getty Images Europe
PARIS, FRANCE – SEPTEMBER 28: A worker at a Paris bar sweeps up after closing early to comply with new Covid-19 restrictions forcing bars and cafes in the French capital to close at 10pm on September 28, 2020 in Paris, France. The French capital has seen a surge in Covid-19 cases and was recently designated a “red zone,” which imposes set of restrictions on public gatherings and the sale of alcohol. From today bars are required to remain closed between 10PM and 6AM. (Photo by Kiran Ridley/Getty Images)

“As things improve, ‘whatever it costs’ should turn to when it’s worth it,” Villeroy said during today’s interview.

Speaking earlier this week on France Inter, Finance Minister Bruno Le Maire said the government priority is employment, investment and economic recovery.

“All the debt linked to this crisis is investment. It will have to be repaid, I’ve always said that. But this reimbursement will come when we have got growth back,” Le Maire said.

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