Goldman Sachs: France—Economic Challenges and Opportunities (Stott). “France’s economy has recently underperformed the rest of Europe. Growth has slowed to below potential, government debt-to-GDP is on the rise, and 10-year borrowing rates are closer to Italy’s than at any time in past decades. Recent events have reinforced political uncertainty and prompted questions regarding France’s medium-term prospects. We outline here the structural challenges faced by France, as well as the opportunities. We think France’s main economic challenge will be to stabilise public debt. To that end, the government will eventually need to run a 1% of GDP primary surplus, compared with today’s 3% primary deficit. The effort should, in our view, be focused on reducing public spending as a share of GDP given limited room for further tax increases. In addition, fiscal policy in France could adopt a more tailored response to future economic shocks and would benefit from a more robust independent evaluation framework.”
Morten W. Langer
