France is facing an unprecedented crisis. Many believe that this is just a temporary slowdown, an ‘end of abundance’ before a return to normal. But this is by refusing to see the reality of its situation that a country, like an individual, risks the worst. Of course, comparisons are not always valid, but Argentina, Lebanon and Zimbabwe were all regional powers before a financial crisis broke their power. France could suffer the same fate.
It is by looking at history that we can understand the problems facing France today. Yet everything seemed to be going well: in 1970, public debt represented less than 20% of GDP. The Second World War had caused such inflation that, in the years that followed, the accumulated debts gradually disappeared as the franc depreciated.
The two oil crises of 1973 and 1979 put an end to the illusion of a world at eternal peace. Mirroring the current conflict in Ukraine, the major powers, including France, became involved in two Gulf Wars with global economic consequences. As oil prices rose sharply and the French economy slowed, Georges Pompidou and then Valéry Giscard d’Estaing launched major debt programmes. At the same time, the 1973 law confirmed the possibility for the State to obtain financing directly from the national central bank.
In the early 1980s, France’s debt began to rise again, just before François Mitterrand made the situation worse. During his first term in office, the president opened the country up to globalisation in a context of strong financial liberalisation, through massive investment programmes financed by debt. At the end of his second term in 1995, France’s debt stood at more than 50% of its GDP.
Events then unfolded rapidly: the introduction of the euro, the financial crisis of 2008 and then the sovereign debt crisis in the early 2010s sounded the death knell for any hypothetical ‘financial stability’. The period of the Trente Glorieuses (thirty glorious years) is well and truly over. Like its European neighbours, France continues to resort to borrowing to weather these crises and keep a predatory financial system alive. In 2017, debt reached the symbolic threshold of 100% of GDP. The rest is history: over the last seven years, public debt has increased by more than €1 trillion under Emmanuel Macron, mainly to ensure his re-election.
In total, more than €3.4 trillion in debt has accumulated over half a century. At the same time, France is the only country in the eurozone to have four simultaneous deficits: the budget deficit, the primary budget deficit, the trade deficit and the balance of payments deficit. But France’s problem has more to do with debt than with spending, particularly spending linked to the post-war social model. Admittedly, it is because our country has historically chosen to have a powerful welfare state that it spends a lot and has run up debts. Every budget has been in deficit since 1975. But there is no highly indebted country whose level of spending is not high (except Japan, which is a pure exception). The reverse is not true: a highly indebted country necessarily experiences a concentration of wealth and a worsening of social and economic inequalities, which automatically leads to an increase in spending – thus triggering a vicious circle of debt.
That being said, this trend, a sign of an extremely weakened France, is now being passed on to a government at a standstill, in the context of a major political crisis. The dissolution of 2024, the succession of anti-democratic power grabs with the use of Article 49.3 and, now, the resignation of the former Prime Minister, whose ministers are only handling day-to-day business, have plunged the country into a dramatic situation. The illusion of a Fifth Republic guaranteeing stability ‘always and in all circumstances’ has vanished. Times have changed and the rules of yesteryear are no longer suited to the contemporary world.
Our political leaders are now overwhelmed by these long-standing historical trends. Whether it be the government’s proposals for the 2026 budget or the opposition’s proposals for a counter-budget, neither will succeed in halting France’s financial decline – and, with it, its political and institutional crisis. For since the emergence of economic laissez-faire, politics has remained subject to the market economy.
In recent months, budget proposals have multiplied, making headlines in the media: spending freezes, elimination of public holidays, contributions from the highest earners, taxes on the wealthiest individuals… But like a band-aid on a wound, these measures would only temporarily reduce the national debt without changing its trajectory.
One example among many: the ‘Zucman’ tax, aimed at taxing assets worth more than €100 million, would bring in €20 billion for the government, while the interest on the debt alone already amounts to €60 billion, and the country needs to issue €300 billion in debt in 2025 – including €70 billion in the last three months alone. How can we imagine that such a change could have an impact in the medium term?
No programme of any significance is currently being put forward. This belongs to history – but, unfortunately, no one seems willing to write it. In a period of upheaval such as ours, only radical reforms could be effective. However, nothing has been proposed concerning France’s economic and monetary sovereignty, the 25% share of debt held by the Banque de France (debt that the State repays to itself, as the Banque de France is nationalised), or the fact that more than half of our creditors are foreign investors, making France vulnerable to external interests. But all this remains inconceivable to most people. For the conditions in which the country finds itself, the result of several decades, constitute a new reality that seems impossible to change.
Given its situation, France risks facing what could be called a ‘Greek-style scenario’. In this scenario, it would have to accept a drastic change in its standard of living: reducing spending to balance the budget, allowing inflation to run rampant and, possibly, increasing taxes and duties. This would lead to a significant decline in the French standard of living, accelerate the privatisation of the country – particularly through the arrival of foreign investors – and further deteriorate public services. As a result, France’s already diminished voice on the international stage would be further weakened, and the country could fall out of the top ten world powers.
This major debt reduction plan could be implemented today, or under much more dramatic conditions if it were to be implemented in the coming months, as French borrowing rates continue to climb week after week. They are now higher than those of Greece, Portugal or Spain, even though the combined GDP of these three countries does not match that of France…
The next government could also opt for a showdown, proposing amendments to European treaties or engaging in a standoff with the current framework, which is not tailored to the specific characteristics of each country and prevents them from making real decisions about their budgetary trajectory. Such a solution would free up room for manoeuvre and give the country back control of its monetary policy: ensuring the financing of the economy by the central bank (rather than the markets), deciding on interest rate changes, introducing capital controls, or even cancelling the portion of debt held by the Banque de France.