What economic policies for France to prevent a serious crisis in the future?

We see five conditions for France’s economic policies to avoid a serious economic, social or financial crisis in the future. The government must be able to pick public investments whose returns are significantly higher than the current level of long-term interest rates . This will prevent a public debt crisis in the more-than-possible scenario in which interest rates rise in the future without an increase in potential growth. The need to increase long-term investments must be made compatible with the private sector’s very high required return on equity, which will probably require a mix of public and private financing. Capacity must be developed to offset the costs of the energy transition: destruction of capital (which may severely weaken some economic sectors), change in labour force skills, risk of renewable energy equipment being largely imported, increase in inequality due to rising energy prices. Low wages must be increased without a loss of competitiveness, investment or unskilled employment. Real estate prices will have to be stabilised to prevent a social and financial crisis should the ECB’s monetary policy remain expansionary for long and due to the forced savings held. Failing this, they will spontaneously continue to grow very rapidly.