Letter to the President of the Republic: Beyond the urgency, we need to broaden our horizon, now more than ever

Summary

This 2026 Letter takes an innovative approach by bringing together two time horizons. Once again, it comes at a time of exceptionally high uncertainty: this time, the conflict in the Middle East is driving the urgency. But we cannot limit our economic outlook to simply moving from one crisis to another. Therefore, this Letter also takes a longer term view, examining the performance of the French economy over the past fifteen years and since the onset of the current era of crises. How is France’s economy faring in this new world?

Given the considerable uncertainty surrounding the duration and scale of the shock, it is wise to prepare for each of the three scenarios published by the European Central Bank (ECB) and the Banque de France, and not only for the most favourable one. This is clearly a negative supply shock leading to lower growth and higher inflation across the board, as is already evident from the initial estimates of French economic activity for the first quarter and the rise in prices in April. Our March projections remain valid: France is expected to maintain slow but positive growth, while inflation, following a potentially significant spike in 2026, is expected to return to below the 2% target thereafter.

In light of this situation, monetary policy must be cautious but vigilant: ready to act without hesitation to prevent rising energy costs from spreading through second round effects; but having gathered sufficient data on these spillover risks. Fiscal support measures, which are often called for, have in practice proved to be costly, piecemeal and even counterproductive, as they fuel demand for oil and thus drive up prices. Any measures taken must therefore be temporary and extremely targeted, particularly in France, which has no fiscal leeway and must imperatively reduce its public deficit. The best response to the current crisis is to speed up the energy transition, which will reduce our dependence on oil products and the Middle East. More generally, that is Europe’s agenda for economic and financial sovereignty that is only just beginning to be implemented following the Letta and Draghi reports.

To broaden the time horizon, this 2026 Letter also aims to provide a factual snapshot. Some forty indicators, divided into five chapters, trace France’s economic performance since 2010, a period that began with the European financial crisis and saw a succession of severe shocks. The charts also compare France’s economic performance to other similar European countries; the comparative performance is, of course, the most significant.

Overall, over a fifteen year period, France has registered an intermediate performance, often close to the euro area average, which itself is significantly lower than that of the United States: annual growth in France has averaged 1.1%, compared with 1.2% in the euro area, and 2.3% in the United States. As France’s population growth has been significantly higher, its GDP per capita has increased less. Household purchasing power, meanwhile, rose at the same rate as in the euro area as a whole, at 0.7% per year. This is largely due to fiscal and social transfers, which have contributed to the deterioration in public finances. France now has almost the highest levels of public spending and deficit in the euro area, and since 2010 its public debt has risen by almost 30 percentage points of GDP, compared with near stability elsewhere in Europe.

Conversely, France has significantly improved its performance in what was its previous black spot, employment. The unemployment rate has fallen, and the employment rate has improved – particularly among older people – whilst remaining below the European average.

Inflation in France has averaged 1.9% since 2010, one of the lowest rates in the euro area. This achievement has made it possible to balance the protection of purchasing power with improvements in cost competitiveness.

If we look more closely at the situation of businesses and households, France has sound private finances despite its poor public finances. It performs well in the areas of health and decarbonisation, but less well in education and private research and development. It has improved its competitiveness, but has not yet managed to durably restore its external accounts.

The countries of Northern Europe, particularly the Netherlands, Sweden and Denmark, appear to perform best overall in Europe. The big picture of our economy is that we have some real strengths but we have to improve our game collectively. To achieve this, improvements need to be made in three areas:

• First, the general government component (central government, as well as local authorities and social services). Our country can maintain a social model similar to that of its neighbours, whilst significantly enhancing the efficiency of its public spending. But until we have at least stabilised total expenditure in real terms, we must stop dreaming about unfunded tax cuts;
• Second, consideration for future generations. France must stop constantly passing on its deficits, as well as the burden of debt and pensions, to them. Young people, like everywhere else, are also facing a mounting array of other challenges: the housing crisis, climate change, and so on. If our country continues to make gerontocratic choices, it will not be able to prepare properly for the future;
• And lastly, the overall volume of work and, above all, its quality. France can achieve greater growth if, collectively, it works harder – particularly through higher employment among older people – and even more so if it works more efficiently. Achieving greater productivity gains requires addressing a qualitative challenge in the areas of research and innovation, as well as professional skills.

To put it simply, France, together with Europe, holds many of the keys to its economic destiny in this fragmented world; within less than ten years, it could return to a potential growth rate of around 1.5% per year, compared with just over 1% today, and that would make a world of difference. Beyond the numerous controversies of the moment, our collective debate can only benefit from taking into account our neighbours more closely, grounding our analyses more firmly, and drawing from them medium term goals that we must pursue with persistence.