The French government’s attempt to bring the country’s spiralling debt under control has sparked a political crisis that has toppled a series of prime ministers and left Europe’s second-largest economy teetering on the brink.
At a time when the “very sovereignty and freedom of France and Europe are at stake”, the country is “paralysed by chaos, impotence and debt”, veteran political commentator Nicolas Baverez told the BBC.
How bad is the debt crisis? The French economy “appears strong at first glance”, said The New York Times. Prior to Donald Trump’s tariff war, “growth was slow but steady and employment was picking up”. But “behind the scenes, outsize government spending and falling tax receipts” has “strained finances”.
France now has the highest consolidated national debt in Europe, at around €3.4 trillion, according to the country’s National Institute of Statistics and Economic Studies. Its debt-to-GDP ratio – 113% – is surpassed in the EU only by Greece and Italy, which were at the heart of the European debt crisis a decade ago.
How did the debt get so high? France has long been among the most “spendthrift” countries in the EU relative to its economic output, said CNN. Social welfare such as pensions and unemployment benefits represent the largest chunk of expenditure, but the state also funds some “unusual benefits”, such as financial support to families employing a nanny for children under six.
Combined with huge public spending to soften the blow of the Covid pandemic and the energy crisis sparked by the Ukraine war, and with the rising cost of government borrowing, these commitments have fuelled a massive increase in debt over the past two decades: from 60% of GDP at the start of the 2000s to a projected 125% by 2030.
What will happen next? France is still not at “immediate risk” of an economic crash, said Le Monde. The possibility of an intervention by the International Monetary Fund, which has been touted by some even within the government, seems “highly improbable”.
The best-case scenario is that “the country’s inherent strengths – its wealth, infrastructure, institutional resilience – will see it through” what may prove to be a temporary storm, said the BBC. “But there is another scenario: that it emerges permanently weakened, prey to extremists of left and right, a new sick man of Europe.” |