France’s central bank governor pushed back against nationalist political sentiment on February 7 by stressing that the euro is the country’s “best protection”.
As reported by The Wall Street Journal, François Villeroy de Galhau said that differences in borrowing costs, or the spread, between France and Germany have narrowed sharply since the introduction of the euro.
“The French spread may also temporarily react to political uncertainties, but remaining in the euro over the long term continues to be our best protection.”
He said it was “wishful thinking” to assume that leaving the eurozone and European Union rules that cap budget deficits would benefit the economy. “The financing of deficits would be much more costly for euro-area countries leaving the single currency, if we were to return to the spreads before the euro,” he explained.
However, French National Front leader Marine Le Pen, who is gaining in popularity ahead of the presidential elections later this year, blames the euro for high unemployment and declining spending power. She has promised to pull the country from the single currency if elected.
But Villeroy de Galhau warned in a column published in Le Figaro that exiting the euro could possibly devalue a new French national currency would push debt-financing costs up by an extra €30bn a year.