France is undergoing a period of heightened political instability, marked by successive short-lived governments and growing social polarization. This instability is not merely institutional: it reflects a profound demographic and technological transformation, further aggravated by successive global economic shocks. The country appears trapped between unrealistic populist promises and binding fiscal constraints.
French public debt now exceeds 110% of nominal GDP, whereas in 2019 it was below 100%. Lockdown policies and the extensive social support measures adopted during the pandemic created a level of public expenditure from which the country has been unable to retreat. In 2024, the budget deficit reached 6.1% of GDP, breaching the limits established by the European Fiscal Compact. The government led by François Bayrou, lacking a parliamentary majority and facing questionable political legitimacy, presented an ambitious adjustment plan aimed at reducing the deficit below 3% by 2029. The measures included significant spending cuts as early as 2026, but the plan was rejected after the defeat of a somewhat quixotic confidence motion in the National Assembly, which exposed the fragility of the executive and the widespread resistance to fiscal consolidation.
Pension reform has become one of the most divisive issues in French politics. The pay-as-you-go system, in which active workers finance retirees, is under severe strain due to demographic aging. The decline in the birth rate and the increase in life expectancy create a structural imbalance: there are fewer contributors for each retiree. The model, once a symbol of intergenerational solidarity, has become unsustainable.
The deterioration of the ratio between contributors and pensioners requires ever-growing contributions from both workers and firms. The transition to a capitalization-based model is politically unpopular and technically complex. Citizens and the parties that represent them hold antagonistic and irreconcilable positions, which contributes to enormous fragmentation in the National Assembly.
One of the most striking paradoxes of the French economy is the fact that, in many cases, pensioners’ incomes exceed those of active workers. Generous pensions, the result of decades of relative prosperity, contrast with persistent wage stagnation. This inversion of the social logic of pensions discourages work, especially among young people, who feel penalized by a system that offers them neither justice nor security.
With public expenditure representing around 58% of GDP, France has one of the heaviest states in Europe. The public sector is a source of income for a significant share of the population, which makes any attempt at fiscal restraint largely unpopular. Resistance to reform is not merely ideological, it is structural. Immigration, essential to ensuring the production of goods and services in an aging economy, has become an explosive issue. The tension between the need for
labor and the social rejection of immigration is a contradiction that France cannot resolve politically. This ambivalence exacerbates polarization.
The French crisis is multifaceted: rising debt, a persistent deficit, demographic aging and social imbalances require profound reforms. However, political fragmentation makes such a path democratically unviable. President Macron, unable to build stable parliamentary majorities, should accept the results of the 2024 legislative elections as the legitimate expression of the popular will.
As happened in Greece, parties with unrealistic proposals may rise to power, but they cannot govern with their banners if those proposals are financially unfeasible. Many voters only accept unpopular measures after witnessing the failure of populist alternatives.
One of the most striking paradoxes of the French economy is the fact that, in many cases, pensioners’ incomes exceed those of active workers.
The French crisis is multifaceted: rising debt, a persistent deficit, demographic aging and social imbalances require profound reforms.
João Borges de Assunção, Professor at CATÓLICA-LISBON