Lecornu Optimistic on Resolving French Political Crisis

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00:00He does seem to be saying things that at least at the margins, Jean, the bond markets like

00:04and we see a little reduction in yield as a result of this.

00:07But is there anything new in what we're being told here?

00:12I mean, it's not really new, but we can see some light at the end of the tunnel.

00:15So it's pretty positive from that perspective.

00:17But it is not a surprise because he has been speaking with its previous majority.

00:22So it's not a surprise that they wanted to reduce the deficit.

00:24But the hope at the end of the tunnel is coming because we could expect the centre-left to agree with the prime minister

00:32if the prime minister proposes to suspend the pension reform, which is a key element of the economic platform of the Socialist Party.

00:42So some light at the end of the tunnel, but it's not a surprise at the moment.

00:46And we will expect the prime minister to make some announcements later today.

00:50Jean, what would be the impact in terms of long-term French finances of taking away this pension reform process?

01:01So I guess it's a trade-off between short and medium term.

01:05On the short term, I guess it's more important to have a budget which is passed and to have a consolidation which is on track.

01:11But on the long term, it's a key risk for French debt sustainability because we have calculated that a reversal of the pension reform

01:19would increase the debt-to-GDP ratio by 15 basis points over 2050.

01:25So it's a large increase compared to baseline if the pension reform is reversed.

01:31But I guess having a budget passed is really important on the short term.

01:35And French politics could deal with a new reform of the pension system later after the presidential election.