Blanchard, who returned to France after a 50-year career at the Massachusetts Institute of Technology, said that while a market crash is not imminent, he sees one occurring in the near future.
France is on track for the first time in its modern history to have a proper budget after lawmakers sacked Prime Minister Michel Barnier over plans to cut a huge budget deficit that amounted to 6.2% of gross domestic product last year. I entered the new year without one. .
Barnier’s successor, François Bayrou, has also prioritized reducing the budget deficit, but he has proposed less ambitious tax increases and spending cuts to get more MPs on board.
Blanchard said the Baillou government has “more or less done its best, but its best is not much and it’s not good enough.” He added that the current impasse, where no political group has a majority in parliament, is not helping.
“For now, French political parties are not ready to accept what is needed,” Blanchard said. “It’s going to take a budget crisis or a financial crisis for the political parties to sit down and say they’re going to do something.”
Blanchard added that he did not believe that Brussels, which imposed excessive deficit procedures on France in 2023 for overspending, has the power to push the country in the right direction.
“Brussels has no real means of forcing France to do more. Only the market can do that,” he said.
