Another economic policy will be needed in the euro zone and France once real long-term interest rates become higher than potential growth

Public debt sustainability in the euro zone as a whole and in France was ensured when real long-term interest rates became significantly lower than potential growth in 2014. But the most likely scenario for the future is that real long-term interest rates will become higher than potential growth, due to the significant investment needs, the decline in potential growth and the rise in structural inflation that the ECB will have to respond to. This scenario will require a complete change in economic policy: It will require a significant reduction in the structural fiscal deficit; Given the significant need for public spending and the difficulty in achieving productivity gains in the public sector, this reduction in the deficit will not be achieved by a reduction in such spending; Tax revenues will therefore have to be increased; in countries where the employment rate (young people, adults, seniors) is low, the most effective way to increase tax revenues will be to conduct policies to raise the employment rate; in other countries, the tax burden will unfortunately have to be increased. This change in economic policy will have a positive effect: countries with a low employment rate will become aware of the need to raise it.