France Central Bank States Cannot Afford Additional Fuel Subsidies
He warned that proposals from opposition parties and labor unions for tax cuts, fuel vouchers, or price caps would worsen the country’s public deficit, currently around 5%. “The risk is further deepening the deficits and paying even more for our mortgages and business loans,” Villeroy de Galhau added.
The governor emphasized that long-term solutions lie in achieving energy independence and investing in the energy transition, rather than relying on temporary subsidies. He also noted that the ongoing conflict in the Middle East could slow France’s economic growth and slightly increase inflation, projecting first-quarter growth of 0.2%–0.3% and around 1% for 2026.
The regional crisis intensified after US and Israeli strikes on Iran on February 28, killing more than 1,200 people, including Iran’s Supreme Leader Ayatollah Ali Khamenei. Iran retaliated with drone and missile strikes targeting Israel, Jordan, Iraq, and Gulf states hosting US forces, and has effectively closed the Strait of Hormuz, a crucial route for roughly 20 million barrels of oil and 20% of global liquefied natural gas trade.
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