France: The loss of potential growth due to the crisis will impose a reform of its social welfare systems

Recessions lead to a loss of productive capital, a loss of human capital, a deterioration in the financial situation of companies and therefore a loss of potential growth. In the case of France, this means that one should expect very low potential growth in the wake of the COVID crisis. Combined with population ageing, this will lead to a structural deterioration (not a temporary one caused by the recession) in the financial situation of social welfare systems (pensions, healthcare). A reform of these systems (increase in the retirement age, more efficient healthcare spending, getting households to bear a larger share of some non-essential healthcare spending) will therefore be necessary if an increase in the tax burden is to be avoided .