 "'Bayrou's best isn't enough': France heading to a crash, warns IMF's former chief economist")
France is on the brink of an economic crisis and must act swiftly to rein in its budget deficit, former International Monetary Fund (IMF) chief economist Olivier Blanchard warned, pointing to years of political inaction as the root of the problem.
He also criticised Prime Minister Francois Bayrou’s actions, saying “Bayrou’s government “has done more or less its best, but its best is not much, and is not sufficient.”
Like his ousted predecessor Michel Barnier, Bayrou has made deficit reduction a priority, although with less ambitious tax hikes and spending cuts designed to gain parliamentary support.
While this has been beneficial, Blanchard said in an interview with POLITICO “We are absolutely not doing what is needed, that’s for sure.”
After a five-decade career at the Massachusetts Institute of Technology, Blanchard has returned to France, where he sees troubling signs of a looming market crash.
Political gridlock could cause disaster
While not predicting an immediate collapse, Blanchard cautioned that France’s failure to address its massive budget deficit, which stood at 6.2 per cent of gross domestic product in 2024, puts the country on a precarious path.
The situation is exacerbated by political gridlock after lawmakers ousted PM Barnier over his aggressive deficit-reduction plans, leaving the country without an approved budget for the first time in modern history.
France’s political impasse, in which no party holds a parliamentary majority, further complicates efforts to balance the budget. “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 also expressed doubt that European Union mechanisms could compel France to act. “Brussels doesn’t have the practical tools to force France to make a bigger effort; only markets can do that,” he said
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