Danger signs from France

To say that France has been facing some serious political uncertainty and instability in recent years would be an understatement. The latest tenure of the nation’s prime minister François Bayrou lasted only nine months, and he was the fourth person to serve in that position in the last two years. Bayrou resigned last month after losing a parliamentary confidence vote on his government’s plan to address ballooning public debt.

Less than five years after the conclusion of extended protests across the country over reforms to the nation’s labor regulations and taxation schemes, public debt in France is at an all-time high. The COVID pandemic helped to halt those protests in 2020, but in 2023 there was more unrest over attempts to reform pension schemes, and the underlying structural challenges facing the nation remain unaddressed. Indeed, they have been exacerbated in the intervening years as a series of failed coalition governments have been unable to move forward on implementing necessary reforms.

Bayrou had called for a confidence vote, hoping to solidify support for what many considered a radical plan to cut spending by €44 billion before 2026. France’s national debt is €3.3 trillion, nearly 115 percent of GDP. “Our vital prognosis is at stake. France has not had a balanced budget in 51 years,” warned Bayrou. “It’s the last stop before the cliff, before we are crushed by the debt.” But Bayrou’s pleas for fiscal reform went unheeded, as he lost the confidence vote and subsequently resigned.

French President Emmanuel Macron has now tapped former Defense Minister Sébastien Lecornu to be the government’s third prime minister in less than a year. Lecornu faces the monumental task of pulling together enough support for a realistic budget in the face of a deeply divided and scattered French political landscape.

France’s public debt crisis is noteworthy, but it is in no way unique. Governments across the developed world, including Western Europe and the United States, face increasing debts, ongoing deficits, and growing entitlements and social spending. All this is happening while global hostilities are on the rise and governments are also pledging to increase military spending. On top of that, the costs of financing public debt are also growing, which means that merely servicing already existing debt is taking up a larger and larger share of discretionary spending across Europe and America.

France is at the vanguard of a host of nations facing difficult and increasingly painful choices. The debt-to-GDP ratio in the United States, for example, exceeds that of France at more than 122 percent. Certainly, the United States has advantages and options that make our situation distinct from the far smaller French economy. But no economy is large enough to survive infinitely expanding public debt, and the trajectory in the United States over the last 25 years is dire.

The American federal system is also different from the French parliamentary structure, which also makes the challenges for Americans more salient. We have the ability, if we so desire, to elect a government that can address structural challenges without the danger of losing control of a multi-party governing coalition.

More than a decade ago another European politician aptly captured the dynamic that is at work in the evolving debt crisis across the developed world that politicians have been unable or unwilling to address. “We all know what to do,” said the prime minister of Luxembourg Jean-Claude Juncker, “but we don’t know how to get re-elected once we have done it.” Indeed, we do know what needs to be done: we need governments to spend less even while the economy must grow more. And cuts in government spending have to be made not only in discretionary areas but must really be focused on the long-term entitlement and social spending programs that will only become more unsustainable as demographic trends continue to place increasing pressures on a diminishing population of workers.

The only feasible way forward seems to be for the public to demand politicians who are willing to speak hard truths and follow through when things become difficult. That requires maturity and self-discipline, virtues that seem to be all too rare among Western democratic peoples nowadays. But the French public debt crisis should serve as yet another warning to others that simply ignoring the problem will not make it disappear. The best time to act to address these challenges is yesterday, and the second-best time is today. Our own prospects and possible solutions only get more difficult the longer we wait.