On Tuesday, French Prime Minister François Bayrou unveiled an austerity package aimed at preventing the collapse of France’s deteriorating public finances. The political resistance was immediate.
Over the years, France has earned a reputation for being virtually ungovernable. Time and again, the country has proven the thesis that parliamentary democracies are, in principle, fiscally unreformable. Attempts to cut social spending usually result in the political death of those responsible. In a nation that has elevated its social insurance systems into a “state within the state,” such reforms amount to political suicide.
In their pre-crisis phase, postmodern democracies tend to morph into illusory social bodies whose internal peace rests heavily on debt-financed welfare largesse. In France, planned budget cuts frequently find their ignoble end in the burning suburbs of major cities.
Same Game, New Player
The next political suicide candidate, it seems, is Prime Minister François Bayrou.
On Tuesday, he presented Parliament with a first package to consolidate the country’s ailing finances. The plan includes €44 billion in spending cuts to avert EU sanctions and reduce the budget deficit from last year’s 6.1% to 4.6% by 2026.
If one uses the long-forgotten Maastricht Criteria as a benchmark, France would still overshoot the 3% deficit ceiling next year. The country, which allows itself a staggering 57% government spending ratio to pacify its myriad social tensions -- including the challenges of mass immigration -- is still far from fiscal normality.
Sounds Good -- But Here Comes the Catch
In addition to social spending cuts, pension increases are to be frozen through 2026. Two public holidays are to be eliminated in an effort to boost productivity in France’s underperforming economy. From an economic standpoint, incentivizing private investment would be a far more effective approach -- but we are talking about a Brussels-inspired government, so expectations must be tempered.
The public sector is also expected to contribute. One-third of retiring civil servant positions -- around 3,000 -- will remain unfilled.
This package alone is likely enough to drive both the Left and Right opposition into open revolt. They will seize the moment to publicly pressure the government. Healthcare cuts amounting to €5 billion are also planned, along with a new windfall tax on wealthy individuals and large corporations that is projected to raise another €10 billion. The VAT on gas and electricity will rise from 5.5% to 20% in August. Airfare will also become more expensive.
To push the package through, Bayrou is attempting to bypass the fragmented and reform-resistant Parliament using Article 49.3 of the French Constitution. This has already ignited fierce political backlash and could well derail the reforms altogether.
Opposition as Routine Reflex
The response from France’s opposition was as predictable as it was fierce. The left-wing La France Insoumise condemned the measures as an attack on social security, citing the pension freeze as especially unjust. Jean-Luc Mélenchon described the plan as “a reckoning with the weakest,” warning that it would stoke social unrest.
Meanwhile, Marine Le Pen’s right-wing Rassemblement National criticized the new taxes on gas, electricity, and travel as burdens on the middle class, accusing the government of letting large corporations off too lightly.
Both camps are united in their outrage over Bayrou’s use of Article 49.3 -- Le Pen labeled it a “democratic affront.”
The center-right Republicans remain divided: some praised the return to fiscal discipline, others warned of looming economic stagnation. Protests are already being planned, and new votes of no confidence -- previously unsuccessful -- are likely to resurface. Street demonstrations are all but certain. France is bracing for turbulent weeks.
What solidifies the paralysis is partisan opportunism. Every opposition party sees the budget crisis as a chance to call snap elections and expand its power. In this mode, the nation cannot overcome its polarization, let alone reach a rational solution to the fiscal dilemma.
The Fog Begins to Lift
What’s clear is that all segments of society will have to shoulder painful sacrifices. There can be no sacred cows, given the severity of the debt crisis. In the long run, the bloated state apparatus must be scaled back -- something Germans are all too familiar with.
Yet in the end, with political gridlock and party games compounded by a recurring cycle of social unrest, it is unlikely that France will embark on an austerity path without outside pressure from capital markets. The level of social pain required exceeds the current potential for political consensus.
It is entirely possible that, in the coming weeks and months, we’ll learn where Europe’s next sovereign debt crisis will ignite. And the odds are strong that this time, it could be Paris that strikes the match.
Image: AT via Magic Studio