France: Bankruptcy Is Now Imminent

France is experiencing an unprecedented budgetary crisis. The deficit is at risk of exceeding 6% in 2024. France now risks bankruptcy, which would drag the entire eurozone into the abyss.

France: An Abysmal Budget Deficit

The French government is facing a troubling financial situation. The deficit could exceed 6% in 2024, forcing the executive to plan a budgetary effort of 60 billion euros for 2025. Despite this drastic measure, public spending will continue to rise by 2.1%.

This situation raises serious questions about the management of public finances. Voices are being raised to point fingers at those responsible and question potential concealments.

The finance committee of the National Assembly, chaired by Eric Coquerel, is considering transforming into an investigative committee. The goal would be to understand how such a slippage could have occurred.

This approach underscores the magnitude of the crisis of confidence affecting state financial institutions.

A Government Under Pressure

The solemn vote on the budget is scheduled for November 5. In this tense context, the Barnier government could be forced to resort to Article 49.3 of the Constitution. This decision could further weaken the executive, already in difficulty.

The government’s credibility is being undermined. Critics directly accuse Emmanuel Macron of being responsible for the debt. The president is said to have refused certain cost-saving measures, particularly concerning retirees, fearing electoral repercussions.

This situation highlights the tensions within the executive.

Controversial Budget Cuts

In response to this crisis, the government is considering budgetary cuts in several sectors. The justice department could see its budget reduced by 500 million euros, a decision that raises concerns in an area already underfunded compared to European standards.

Local authorities are also in the spotlight. The government plans to ask them for an effort of about 20 billion euros, or one-third of the total effort. However, the local authorities have not yet given their consent, which suggests difficult negotiations ahead.

The Impact on Public Services

The budgetary crisis is already having tangible effects. The gendarmeries in most of France’s communes are no longer paying their rent, accumulating about 200 million euros in debts. This situation is putting pressure on the communes and raises questions about the state’s capacity to fulfill its sovereign duties.

This issue is not new. In 2020, the tab even climbed to 1 billion euros before being settled. However, the recurrence of these payment delays highlights the structural difficulties of public finances.

Other public services could be affected. Payment delays are reported in various sectors, such as legal aid. This situation could quickly become untenable and lead to a degradation of public services.

Financial Markets Facing France’s Bankruptcy

Financial markets are beginning to doubt French financial solidity. The French spread has risen above that of Portugal and Spain. France is now borrowing for 5 years more expensive than Greece, a worrying sign of how its economic health is perceived.

French credibility is at stake. If investors lose confidence in the information provided by the government, it could have dramatic consequences on borrowing rates and worsen the situation.

Rating agencies are closely monitoring the situation. A downgrade of France’s credit rating could have catastrophic consequences on its ability to borrow and on the cost of its debt.

A System at the End of Its Tether?

The euro system has allowed France to continue borrowing despite its structural weaknesses. But with Germany itself in trouble, this mechanism might have reached its limits.

This analysis raises questions about the long-term viability of the European Economic and Monetary Union. If France, the second-largest economy in the eurozone, were to face severe difficulties, the entire European structure could be threatened.

The Real Problem: Pensions

A significant part of the problem lies in the financing of pensions. Expenses related to pensions have significantly increased over the years, rising from 36.5% of GDP to 57% of GDP.

This situation raises the question of intergenerational equity. Today’s working population finds themselves in a delicate position, having to finance a system they may not benefit from in the future. Projections indicate that by 2055, pensions could have lost 40% of their value.

Despite the urgency of the situation, the government seems hesitant to tackle this issue head-on, fearing electoral repercussions. However, this inaction could worsen the situation in the long term.

Too Many Civil Servants in France?

The management of the civil service is also at the heart of the debates.

Accusations of patronage are regularly made against the territorial civil service. The creation of unproductive public jobs is pointed out as a means to maintain a form of social peace, to the detriment of economic efficiency.

This situation raises the question of state reform and its structures. Reducing the number of civil servants could generate substantial savings, but faces political and union resistance.

French People Becoming Poorer

The consequences of this budgetary crisis are beginning to be felt in the daily lives of the French. There is a decline in meat consumption, which some attribute to ecological or health concerns, but which could actually be the result of financial constraints.

Similarly, the decline in energy consumption, presented as an ecological success, might simply be the reflection of the population’s growing economic difficulties. These developments indicate a degradation in the standard of living that the government is struggling to acknowledge.

The Bankruptcy of France

The current situation echoes that of 2010, when François Fillon declared he was leading “a bankrupt state”. The deficit forecast for 2024 (6.1%) is the highest since that period.

The question now is how far economic chaos can go before a revolution erupts. The sacrifices to come could be brutal, with significant social consequences.

The Greek experience might offer a glimpse of the social consequences of such a crisis. However, France, as the second-largest economy in the eurozone and a significant military power, could not undergo the same type of external intervention as Greece could.

The Role of the European Union

The European Union has played a crucial role in maintaining French financial stability over the past decade. The policies of the European Central Bank (money printing), including Quantitative Easing, have provided France with historically low interest rates.

However, this mechanism seems to have reached its limits. With rising interest rates and Germany’s economic difficulties, France is once again exposed to the realities of its financial situation.

This development raises questions about the sustainability of the European project in its current form. A major crisis in France could have repercussions on the entire eurozone and challenge the very foundations of the Economic and Monetary Union.

France is at a critical turning point. The choices made in the coming months will be decisive not only for France’s future but also for that of the European Union as a whole. Given the magnitude of the challenges, a major overhaul of the French social and economic model seems inevitable.