1、Frances economy has recentl y underperformed the rest of Europe.Growth has nsl owed to bel ow potential,government debt-to-GDP is on the rise,and 10-year borrowing rates are cl oser to I tal ys than at any time in past decades.Recent events have reinforced pol itical uncertainty and prompted questio

2、ns regarding Frances medium-term prospects.We outl ine here the structural chal l enges faced by France,as wel l as the opportunities.We think Frances main economic chal l enge wil l be to stabil ise publ ic debt.To nthat end,the government wil l eventual l y need to run a 1%of GDP primary surpl us,

3、compared with todays 3%primary deficit.The effort shoul d,in our view,be focused on reducing publ ic spending as a share of GDP given l imited room for further tax increases.I n addition,fiscal pol icy in France coul d adopt a more tail ored response to future economic shocks and woul d benefit from

4、 a more robust independent eval uation framework.Reducing publ ic spending is therefore l ikel y to remain a key issue.Government nspending in France is currentl y among the highest in Europe,in particul ar on pensions,heal th,housing,and unempl oyment.Spending on defence and energy capacity have be

5、come highl y strategic and are l ikel y to increase further.Education and heal th spending can yiel d high social returns but have suffered from l ow efficiency.Other items,such as housing subsidies and intermunicipal government empl oyment,show l imited efficiency and are of l ower strategic import

6、ance.France wil l crucial l y need to resume structural reforms to boost growth.The nempl oyment rate of the young and ol d remains too l ow and the unempl oyment rate too high.Facil itating economic migration coul d boost skil l ed empl oyment and hel p al l eviate l abour shortages.France al so ur