Europe must spend on defence but few can afford debt rise, Villeroy says

BRUSSELS (Reuters) - Europe needs to increase spending on defence but few countries other than Germany can afford to significantly boost their debt levels, so they must consolidate expenditure, French central bank chief Francois Villeroy de Galhau said on Thursday.

"We need fiscal consolidation... we need debt stabilization," Villeroy told a conference about his native France. "We need to bring the deficit back to 3%."

Villeroy noted that the expected boost in defence expenditure has already increased long term borrowing costs across the euro zone, but these interest rates are still below those paid by the United States.

(Reporting by Balazs Koranyi)