Is France really facing a financial crisis?
Ardent readers of the New York Times might be forgiven for worrying about the state of France’s economy today. After all, headlines on the front page this morning describe France as headed toward “another government collapse” with “financial woes […] pushing its government to the brink.” Borrowing costs are up, they note, Prime Minister François Bayrou will soon be left jobless, and the country’s infrastructure may very well seize up in coming weeks with large-scale demonstrations planned for Sept. 10th and 18th.
The implied cause? Government largesse, of course. Too much social welfare spending – an “eye-popping 57 percent of the nation’s economic output” channeled into such frivolities as “financing hospitals, medicines, education, family reproduction, culture and defense, not to mention generous pension and unemployment benefits.” You know, the unimportant luxuries. France’s deficit, one of two headline articles continues, has soared to 5.8 percent of GDP in 2024, “the largest since World War II and well above the 3 percent limit required in the Eurozone.” Sure, there might have been some extenuating circumstances like the first large-scale war in Europe since World War II and the worst global pandemic since the Spanish Flu, but rules are rules.
And in case the figures the Times marshalled this morning haven’t quite had you coughing up your croissant yet, did you know that French debt is expected to reach 116 percent of GDP this year? Imagine how many more tax breaks could be given if only the National Assembly could find the political will to balance the budget. Sure, everyone might need to sacrifice a couple of holidays, pay more for prescription medication, and accept real cuts to administrative and local government services, but it is a crisis after all, non?
And yet none of the statistics mustered in the New York Times’ article really seem to point to an economic crisis of any type – let alone an existential one which might lead to the collapse of a government. Take, for example, the “eye-popping” welfare-spending figure: 57 percent of economic output on healthcare, culture, defense, pensions, and unemployment benefits – or, in technical parlance, total government expenditure expressed as a percentage of GDP. Is 57 percent really a crisis level? Only if you believe France has been in a perpetual financial crisis since the early 1980s when it began hovering in the relatively narrow range between 50 and 61 percent.
What about the deficit of 5.8 percent of GDP? It’s true that it’s higher than much of the Eurozone at the moment, but it’s not quite as high as, let’s say, the United States, where the deficit reached 6.3 percent of GDP last year. But, of course, “France’s economy is not as robust” as the U.S. or U.K., the Times tells us, a claim that I imagine is deeply rooted in the author’s observation that the French tend to enjoy a leisurely lunch. Did you know they also enjoy long holidays and the occasional picnic? Economic ruin is around the corner.
This is not to say that France is not facing a crisis – it is. President Macron pulled the pin on the hand grenade in July 2024 when he called for new legislative elections (to the surprise and dismay of his ministers) and lost without any one coalition gaining a strong majority. The result has been a fractured legislature led by a series of his own appointed center-right prime ministers (first Michel Barnier, now Bayrou) each of whom has had trouble passing a budget.
But if you read the New York Times’ articles as I have this morning, you get the impression that the crisis is financial, not political. With Bayrou poised to lose his confidence vote today, the Times reports, the interest rate on French debt has increased to 3.45 percent and payments on debt have hit “€66 billion from €26 billion in 2020, larger than the budget for education or the military.” That sounds like a lot. It might, of course, interest you to know that the U.S. also spends more on interest than on education or the military and that France spends approximately half, as a proportion of GDP, of what the U.S. or U.K. spend on debt service and less than other Eurozone peers such as Italy and Spain. Any changes to the attractiveness of French debt over the past year – and debt interest rates are still lower for France compared to the U.S. and U.K., the Times admits – undoubtedly come from the political instability resulting from Macron’s snap-election decision and the government’s continued dual commitment to austerity and low taxes.
Instead of a fiscal crisis, it is a self-inflicted political crisis then and one which owes very little to “outsize government spending” as the New York Times suggests. High levels of government spending are the norm in France where the state provides for excellent, cost-efficient health care, strong welfare supports (for families, the elderly, and the disadvantaged), and continuous investment in infrastructure. It makes little sense to talk about France’s debt-to-GDP ratio or deficit-spending without also explaining their context or trajectory. It makes even less sense to frame France’s current problems as the product of excess welfare spending, when the causes are clearly political.