Bank of France Governor Christian Noyer urged President Francois Hollande to bolster French competitiveness, saying a persistent trade deficit in goods and services needs to be eliminated.
“The persistent current account deficit induces imbalances that are getting worse,” Noyer told journalists today in Paris. “Inverting the trend strikes me as very necessary.”
France’s current account shortfall reached 1.9 percent of gross domestic product last year as imports climbed to 497.5 billion euros ($621.5 billion) last year and exports stalled at 424 billion euros. The cumulative deficit since 2005 amounts to 165 billion euros, compared with a surplus of 130 billion euros from 1999 to 2004.
“We have a problem of lack of competitiveness,” Noyer said. “This evolution is worrying. It’s probably related to a question of prices, of labor costs, though also quality.”
The government needs to tackle the issue in a durable manner and not simply address the deficit by reducing demand, Noyer added.
Cutting the deficit through “a reduction in demand linked to deteriorating growth would mean that when growth recovers, the deficit would simply return more strongly and the loss of competitiveness would be aggravated,” he said.
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