Why in news?

France is experiencing its worst unrest in years, as a month-long student protest movement has widened into nationwide demonstrations against the rising cost of living and deteriorating public services.

Over half a million people have joined marches nationwide, with violent clashes, looting, and arson leading to around 1,800 arrests. The crisis has placed President Emmanuel Macron’s government under severe pressure ahead of the 2027 presidential election, rooted in two interlinked problems: political fragmentation and economic strain.

What’s in Today’s Article?

• The Political Problem
• The Economic Problem: Spending More Than It Earns
• Why Pensions Are at the Heart of the Crisis?
• Why France Can’t Simply Keep Borrowing?

The Political Problem

• France is sharply divided between:
  • The far right — emphasising immigration clampdowns, national identity, and welfare restrictions.
  • The left — advocating stronger public services, redistribution, and workers’ rights.
• Issues of immigration, secularism, and minority rights have deepened these divides.
• Macron’s centrist camp has lost its parliamentary majority, leaving governments unable to pass budgets or reforms smoothly.
• The result: a political stalemate over who pays for France’s problems and what gets cut.

The Economic Problem: Spending More Than It Earns

• France runs an extensive welfare state — pensions, healthcare, education — funded through taxes and social contributions.
• The core issue isn’t high spending alone, but that expenditure persistently exceeds revenue, even without an extraordinary crisis like war to justify it.
• Key OECD figures (2025):
  • Budget deficit: 5.1% of GDP.
  • Public debt: 115.5% of GDP.
• Average Growth Since 2023: just ~1.4% — too slow to ease the debt burden through rising tax revenues.
• The Vicious Cycle: Weak growth, high debt, and squeezed living standards fuel political polarisation and unrest — and in turn, political instability deepens economic uncertainty, discouraging business investment and complicating fiscal fixes.

Why Pensions Are at the Heart of the Crisis?

• France has an ageing population with longer life expectancy, meaning the state must fund retirement for longer while the working-age tax base doesn’t keep pace.
• Macron’s government tried raising the retirement age from 62 to 64, but opposition from both far right and far left stalled the reform.
• Generous pension spending has forced cutbacks elsewhere, notably education — effectively subsidising older citizens at the expense of the young.
• This directly connects to the protests: students are protesting overcrowded classrooms, teacher shortages, and dilapidated schools — the visible fallout of this broader budget squeeze.
• Reforming pensions is politically explosive because it directly affects people’s livelihoods.

Why France Can’t Simply Keep Borrowing?

• Investors lending to governments expect repayment with interest; if debt growth worries them, they demand higher interest rates as compensation.
• This makes new borrowing costlier, leaving less money for public services.
• France’s borrowing costs have risen amid fiscal and political uncertainty — though default is not imminent.
• Eurozone Constraint: France cannot independently print euros to meet obligations, unlike countries with their own currency — a structural limitation unique to eurozone membership.

The Core Dilemma: Economic Fixes, Political Costs

• France’s economy still has genuine strengths — the crisis is that every fix carries political cost:
  • Raising taxes → public backlash.
  • Cutting expenditure → protests (as seen now).
  • Reforming pensions → fierce opposition.
  • Stimulating growth → requires investment confidence undermined by instability.
• Citizens demand better services and protection from rising costs, while investors demand credible debt control — a near-impossible balancing act with a fragmented Parliament and elections approaching.