This 2025 Letter is published at a time of exceptionally strong uncertainty. Our national difficulties have been starkly amplified by the new US administration’s policy shift. The international order and alliances are being upended; mutually beneficial trade and global growth are under attack. Americans themselves, but also the rest of the world, appear stunned. However this Letter is a resolute call for France and Europe to shake off their stupefaction. A call for us to raise our game and broaden its scope beyond the quarrels of the day. A call to act, and act further and with greater unity. We have the means to launch this general mobilisation, provided we have the firm will.
Amidst all of this unpredictability, there is nonetheless one certainty: our victory over inflation is almost assured, with price growth falling to well below the 2% mark in France, and close to this target in the euro area. This has already allowed us to make significant cuts to interest rates. It is also supporting the purchasing power of wages. The current threats pose little risk to our inflation rate, but are more of a downside risk to French growth, which has already slowed. However, the Banque de France’s baseline projection remains that of an exit from inflation without a recession, then a gradual acceleration of activity.
America’s new protectionism is primarily a severe blow to the US economy, but it will obviously have an impact on Europe. As well as organising a concerted trade response, doubtless with targeted retaliation, we also need a positive strategy: to regain control of our economic destiny, we must act in four urgent areas of mobilisation.
First, we need to cement our monetary sovereignty. Fortunately, Europe has built up a solid advantage in the form of the euro, and hence its own monetary policy autonomy. This includes further scope for pragmatic rate cuts. But we also need to prepare our technological sovereignty by working on a digital euro, and develop the international role of the euro.
The second area of mobilisation consists in taking back our fiscal sovereignty. Our longstanding illness – the relentless rise in our public debt – has today become critical: our citizens are worried about it, causing them to over-save; financial markets are charging us a higher risk premium; and our debt interest payments are increasingly eating into our fiscal space. To be credible, we first need to adhere strictly this year to our public spending commitments, in order to cut our deficit to 5.4% of GDP for 2025, based on current economic forecasts. But beyond that, we need a multiannual strategy – stabilising our overall public spending in volume terms, in other words adjusted for inflation. This will allow us to bring the deficit down towards 3% of GDP by 2029, which is the threshold at which we will finally be able to lower our debt.
We cannot have the highest spending in the world and at the same time keep increasing it in real terms. Ending this drift is feasible, on one firm condition: that the efforts on spending efficiency are made not just by the state, which only accounts for 36% of total expenditure, but also by social security and local government administrations, whose spending is continuing to rise by over 2% a year in volume terms. Any additional investment in defence will need to be financed, and is even further justification for this overall stabilisation.
We must also aim to boost our potential growth, which needs to be raised from around 1% today to 1.5%. Which brings us to the third area of mobilisation: investing in labour. This is the key to our prosperity and it is entirely in our hands. In France, working more collectively means eliminating the lag of over 15 percentage points in our employment rate for both young people – hence the need for training reforms – and seniors. For the latter, therefore, in the ongoing talks on pension reform, it is not just financial solidity that is at stake, but also our economic strength. But it also means working better and increasing our productivity, notably thanks to artificial intelligence.
To boost growth, we also need to leverage Europe’s strengths – and this is the fourth area of mobilisation. Everything that needed to be said was said in the Letta and Draghi reports and reiterated in the European Commission’s “Competitiveness Compass”. It is urgent now that we effectively implement three imperatives, at no fiscal cost – imperatives that we can call the three i’s. First we need to integrate the single market more – focus on our size – by removing internal barriers, especially in services and energy. Second we need to invest better, giving much greater priority to disruptive innovations and beefing up European equity financing through a Savings and Investments Union. Finally, we need to innovate faster. Europe needs simplification – less bureaucracy, fewer procedures and shorter deadlines. But in response to the temptations voiced across the Atlantic, simplification is not deregulation – and this also applies to the financial sphere. Europe can also mobilise new “coalitions of the willing”: it is not alone on the climate, on open trade or on development financing.
America’s policy shift is obviously worrying. But it should make us realise that what unites us, as French and Europeans, is much more important than what divides us. This is why there has to be a general mobilisation: our response can only be collective, with a fair sharing of the burden and a decisive pace of action. We cannot change the other side of the Atlantic, but we can beef up our side. This can and must be France and Europe’s moment.
