NALLIAH THAYABHARAN

France is in a monumental economic, political, social, and even cultural mess, and is bankrupt due to its most generous welfare systems in the world, as France has a strong safety net for the unemployed and retirees.
France’s most generous welfare system was introduced at a time when there were four workers for every one retiree. That’s now closer to two, and by 2050, it will go down to just one.
Every 50 people in 1970, only one was unemployed. Today, that figure is four times higher. Fewer people contribute to the system, and more people depend on it.
People stopped having kids, and the population became older. Not just that. A person is now expected to live ten years longer than in 1970, which is amazing. But it also adds ten years of pension costs that the state and the workers have to cough up.
Everything put together results in the fact that France is no longer able to afford its generous public spending, and instead of making reforms, they historically just borrowed more money.
Every year since 1970, the French have spent more than they earned. In some years, adding more than well over €100 billion to France’s public debt. But each time the government tries to make a change, the public explodes. This is France’s spending problem with Hindsight.
So, if you’re not from France, and you mostly listen to international media, you likely have the wrong idea. The French need structural reform, and they cannot continue like this.
But each attempt to change the system has resulted in massive public unrest. But there’s a reason why the opposition can mobilize millions of people
In exactly one year from now, Macron is going to retire as the French president, and that gives him one last chance to get France’s finances under control.
France had to be rebuilt after World War II. Not just its cities that were left in ruins, but also economically and socially. The leaders of the late 1940s had one bold vision called “sécurité sociale” (social security).
The French economy was growing fast, often with over 5% of economic growth per year in the 1950s and 60s due to the African resources through colonial and neocolonial economic structures, and the population at this time was young and working.
They rebuilt France with a system where the state guarantees health care, good pensions, and unemployment and family benefits for all citizens.
Following the independence of its African colonies beginning in 1959, France continued to maintain influence over the region, which was essential for then-President Charles de Gaulle’s vision of France as a global power (or grandeur in French) that could rival British and American influence in the post-colonial world. Françafrique was defined by several features that emerged during the Cold War. The first was the African cell, consisting of the French President and his close advisors, which made policy decisions on Africa with the collaboration of powerful business networks and the French secret service. Another feature was the CFA franc, a currency union that pegged the currencies of most francophone African countries to the French franc. Françafrique was also largely based on the concept of institutional Coopération, which was implemented through a series of political, economic, military, and cultural treaties between France and its former African colonies. France also saw itself as a guarantor of stability in the region, adopting an interventionist approach that culminated in military operations averaging one a year between 1960 and the mid-1990s. A defining feature of Françafrique was the network of personal, informal, and familial links between French and African leaders. These networks often lacked oversight and scrutiny, which led to corruption and state racketeering.

By 1970, France had one of the most generous welfare systems in the world, and that’s when the party ended. The oil shocks of the 1970s shattered a dream, and this set France on a different path. Unemployment suddenly jumped from 2% in the mid 1970s to 9% by the late 1980s, creating a larger pool of people who were not contributing to the system, but they were depending on it.
It was the start of a deep structural shift. Economic growth slowed, people had less money to spend, and families started having fewer kids. This all contributed to an aging population, but no politician dared to confront the deeper structural problems.
Before the 1970s, the French government sometimes spent more and sometimes spent less than it earned. But after these shocks, they ran their first serious budget deficits, which came down to several billion euros per year. This could have been, in hindsight, a wake-up call.
But instead, over the next decades, they only increased their deficits, adding tens and sometimes hundreds of billions of euros in debt every year. The model didn’t structurally change. It promised the same level of protection, but the underlying economy could no longer support it.
In the 1990s came the first serious reform attempts. The response was immediate. Weeks of nationwide strikes brought the transport systems to a halt, and the government was forced to retreat. The same pattern repeated in the early 2000s, again in the 2010s, and later in the 2020s.
Reform is now no longer just difficult; it is politically explosive. The French currently find themselves in a deadlock, and they must get their finances under control.
And we’ve seen in 2010 with Greece what could happen if they don’t.
The Greek economy accounts for just 2% of the total EU GDP, but its debt crisis cascaded across the continent. But France is good for 17% of the entire EU economy. This could seriously escalate, and the French have to do something. But if reform is so necessary, why do so many French voice opposition? So it might seem obvious that the French system needs to be reformed, but millions of people are against such reforms, and if you care to listen to their perspective, they might have a point.
France is the second-largest economy in the EU, but year after year, they are spending more than they earn. This built up massive public debt, and as long as investors have confidence in the government’s ability to stabilize its finances, this doesn’t necessarily have to be a problem.
So France wants to play in the same league as Germany, and for many years, investors saw it the same way; they considered an investment in France just as safe as an investment in Germany.
And you can see this by looking at the credit ratings. So a credit score is basically a score that is given by certain companies or agencies about how risky an investment is in a certain country.
And that’s where, in recent years, the picture has changed. France’s credit ratings have been lowered several times since the early 2010s, and now sit at a historically low level.
Rising debt, weak economic growth, and a government consistently spending more than it earns lowered investors’ confidence. To make matters worse, after years of dropping interest rates, the European Central Bank has now started to increase the rates once more.
For France, a country with an unusually large public debt, this is extremely costly. Over the billions of euros that it has borrowed over the years, it needs to pay interest. High interest rates equal high costs. This adds strain to France’s government budget.
But reform is extremely difficult. The rupture began in 2005. That year, French voters were asked to approve a new EU constitution that was backed by nearly the entire political elite. The public voted against it. The constitution was later abandoned, but many of its key elements returned through a new treaty. This one was passed without another referendum in France, and for many voters it felt like a betrayal.
This was seen as proof that major decisions were now made above their heads, in a system that no longer listened to them. In 2016, President Hollande pushed through a sweeping labor reform. Loosening hiring and firing rules to boost the economy. But the public backlash was immediate. Protests erupted across the country, and instead of backing down, the government forced the law through parliament without a full vote.
In the next couple of years, unemployment went down by a few percentage points, but workers saw that the job market had changed. It had become harder to find a stable contract, and employers could now more easily fire their employees. This all contributed to a lasting impression that the people had of the government. When they proposed a reform, they asked the people to take a risk, but this often resulted in an immediate loss.
While the benefits were delayed and uncertain. The government increased taxes on fuel. This was framed as a climate measure, and for many people, especially in the countryside, the extra cost for fuel landed immediately.
For many of them, driving wasn’t optional. They had to drive to go to work. The benefits of paying more for fuel felt distant and unclear. Well, the cost was immediate and painful. This sparked the yellow vest protests. At its peak, hundreds of thousands of people were protesting nationwide.
But what made this moment different was who showed up. It wasn’t just union members or activists, but this time the movement was joined by middle-class workers, retirees, and small business owners.
A government attempt to reform wasn’t interpreted as a shared effort for the future, but as an unfair burden placed on those who were already struggling.
By the 2020s, the dynamic had fully flipped. Macron, in 2023, proposed to raise the retirement age from 62 to 64, and people flipped out. Over a million people took to the streets repeatedly. So for the government, it comes down to a simple math problem. By 2020, there were only two workers left for every one retiree. At current demographic trends, there will only be one worker for every one pensioner by 2050.
The French welfare system is incredibly generous, and to be a little bit more precise, an average person who is retired earns 98% of what an average worker does. And the French government saw a simple solution:
To cut public spending, people had to work a little bit longer, so there were more people contributing for longer and fewer people who were dependent on the system.
But their math may be wrong. The problem isn’t pensions. The problem is public spending. The French government spends more than half of all the money that its economy generates each year. No country in the developed world spends so much money relative to its GDP, but that’s not because of pensions.
Little over a third of spending goes to social protection, and this is the part that includes pensions. There is a relatively high percentage to pay for social welfare, but increasing the retirement age isn’t a silver bullet.
The French government pays a steep price for pensions. They’re really expensive. To be precise, they spend roughly 15% of their entire GDP each year to fund this system.
That’s high and above average, but not much higher than the US or Germany, which both spend around 13%. But the French could retire at 62. That is much earlier than the US or Germany. This system was paid for in large part by the workers themselves. Over 28% of a worker’s income goes to funding this system. In almost no country do workers pay so much to save up for their golden years. And that’s what the government was proposing to change. France must indeed reform, and it’s a decision to do this by reforming pensions.
But in 2010, this was already done. The retirement age was then raised from 60 to 62. And today, a decade and a half later, some estimates say that it didn’t cut government spending at all. While other estimates say that it actually increased government spending, as it added to higher unemployment benefits.
So it was the same pattern all over again. The government first proposes a reform. The loss that people had to take was immediate, while the benefits were far away in the future, and they were uncertain at best. People voiced widespread opposition to these plans of the government, but regardless, it was forced through.
Whether pensions should stay the same as they are, or that they should be reformed, is that this is a choice that ideally the French people should make with wide popular support.
French politicians have often forced reforms through, despite widespread opposition from the people, and this has eroded trust. Now, France is struggling to keep its finances under control. And guess what? People are now skeptical of whatever politicians propose, and this shouldn’t come as a surprise.
It is a fact that reform is necessary, but reform comes at a price. The core of France’s gridlock is that they cannot agree on how the burden of reform is going to be distributed, each time falling on the same people. These proposals hit society in different ways. Young, lower to middle income workers often enter the workforce earlier, they often work more physically demanding jobs, ,and they have more working years before they reach retirement age, as opposed to higher income earners who often spend more time studying.
The problem is that the reforms that the French government is proposing always seem to lay the burden on those people who already have the fewest options, and the benefits for them personally are unclear and far away.
France’s GDP per capita has been virtually stagnant since 2008, almost 20 years without real growth in per capita terms, while the French state has been borrowing like never before. Not only did France fail to grow, but it did so while spending without any restraint. In 2008, French public debt was 70% of GDP. In 2025, it was at 116%. By 2035, we expect France’s public debt to approach 125% of GDP, up from 113% in 2024, and among the highest in advanced economies. And that figure doesn’t even include the state’s future obligations, including pensions and healthcare.
Half of the increase in debt since 2017 is due to fiscal adjustments, relief measures that Macron approved to stimulate the economy, and the other half to extraordinary spending to deal with the pandemic and the energy crisis. The French want more help from the state, but also lower taxes. And naturally, there’s no way to balance anything that way. So much so that France has not balanced its budget since the 1970s, and right now has the highest public spending of any OECD country.  In 2024, France closed with a deficit of 5.8%, the highest in the entire eurozone. And the political chaos has been so great that two prime ministers have already fallen trying to push through budgets that cut spending.
France currently has a completely divided parliament, weakened political parties, and a society that literally takes to the streets in protest whenever there is talk of cuts.
French poll shows far-right leader Bardella winning presidential election. Le Pen’s party has practically everything it needs to win the presidency. And if that happens, France could take a monumental political turn right in the middle of the biggest fiscal crisis it has experienced in decades.
But before the presidential elections, anything can happen: new cuts, more tensions, another prime minister falling, or even a much bigger political crisis. So now the questions are clear. Will France manage to reduce its deficit and curb its debt? What would be the implications if it failed to do so? And what will happen if the country undergoes the biggest political change in its recent history without having resolved anything?
After the 2024 elections, the National Assembly was divided as follows. The left-wing alliance, Novo Front Popular, consolidated its position as the leading force with some 180 seats. The president’s allies, the centrist and moderate ensemble coalition, won 163 seats. And in third place was the National Rally and its allies with 143 seats.  With a total of 577 seats, 289 are needed to achieve an absolute majority, and none of the blocks came even close.
This means that any major proposal from structural laws to the state budget depends on almost impossible negotiations. The situation in the Senate is very similar. These seats are divided among the same three heterogeneous blocks that reflect the political fragmentation in the country.
In France, there is a mechanism that allows the government to pass laws without a vote in the assembly unless deputies table a motion of no confidence that brings down the executive. This would guarantee that the budget would go ahead, but it could generate a huge political crisis.
France has a deeply rooted culture of protest. Imposing a budget by decree could spark mass demonstrations, strikes, and social unrest that the government would prefer to avoid.
France doesn’t face a US- style government shutdown because it can automatically extend the previous year’s budget. The problem is that this would worsen the deficit.
The French economy has been accumulating structural problems for years that no one has wanted to address seriously. Having such a high debt means less room for growth and less capacity to invest in innovation, infrastructure, or industry.
It means that the state is forced to raise taxes because it cannot finance itself in any other way. And above all, it means that an increasing portion of the budget is spent on paying interest.
But it’s not only about the debt. The deficit remains high. GDP per capita growth is almost stagnant, and spending on pensions and healthcare continues to rise year after year.
France is at the limit of its financial maneuverability. The most concerning thing is that this problem doesn’t seem to have a solution in the short or medium term. The main reason lies in how spending is distributed. A large part of the budget is allocated to pensions, healthcare, and unemployment. Another percentage is allocated to local governments, and the remainder is used to cover the basic functions of the state. This structure makes any attempt at cutting spending extremely difficult and politically unpopular because touching any one of these sectors generates immediate conflict. And this spending will continue to increase in the coming years.
Without Political will, any structural reform is impossible. And with Macron, that seems very, very far from being achieved. Not only because of the fragmented composition of parliament, but also because of his party’s ideology, which makes it difficult to take unpopular decisions, even if they are necessary to stabilize the accounts.
Jordan Bardella Le Pen’s heir apparent would win the French presidential election in all possible scenarios. According to polls, Jordan Bardella, leader of the national rally, would defeat any candidate in a second round. All projections point to Bardella becoming president. This means that France is heading towards a leader on the far right of the political spectrum, someone capable of breaking with the centrist tradition that has dominated the country for decades. But will he really be able to solve the deficit problem? The answer is a resounding no.
There are clearly two currents within the right. On the one hand, there is the liberal right, which tends to favor open markets, foreign investment, and growth-oriented economic reforms.
On the other hand, there is the conservative and protectionist right with a much more interventionist economic ideology, which prioritizes state control, aid to national sectors, and visible benefits for certain groups, even if that means increasing government spending.
The National Rally fits into this second category. It is a right-wing party, yes, but its goal is not to reduce the deficit. Its focus is on turning traditional French politics on its head and consolidating its protectionist electoral base, not on balancing the state’s accounts.
And although a complete economic plan has not yet been published, some of its proposals are already public and all point in the opposite direction to debt reduction. Among the most significant promises are repealing Macron’s pension reform, which would automatically increase spending in an area that accounts for almost half of the state budget, and reducing taxes in sectors such as energy and fuel, thereby decreasing state revenues just when they most need to be strengthened. What the national rally is proposing can be summed up as spend more, earn less. France has been polarized for years. With a president from a much more extreme party, that fragile balance will simply disappear.
The French have the spirit of revolution running through their veins. When they don’t like something, they organize politically and take to the streets. And not just symbolically.
France is one of the countries with the longest traditions of social mobilization in the world. Now imagine that same country with Marine Le Pen or Jordan Bardella in the LSC palace. A deeply polarizing figure rejected by a huge proportion of the population. The result is almost obvious. Permanent political instability. Every controversial measure could trigger massive protests. The street could erupt at the slightest spark, and that, for an already weakened economy, is pure poison. Because political instability doesn’t just scare away tourists, it scares away investment. It slows down activity. It increases spending, and it exacerbates existing problems. In other words, a national rally government would not only fail to resolve France’s fiscal crisis, but it would also probably make it worse.