Once upon a time if folks wanted to pinpoint the most economically-vulnerable country in Europe – the one most likely to face a crisis – they would invariably point to Greece or to Italy.
They were the nations with the eye-waveringly high bond yields, signalling how reluctant financiers were to lend them money.
Today, however, all of that has changed. The country invariably highlighted as Europe’s problem child is France.
Indeed, look at the interest rates investors charge European nations and France faces even higher interest rates than Greece.
And these economic travails are central to understanding the political difficulties France is facing right now, with one prime minister after another resigning in the face of a parliamentary setback.
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French PM looks set to lose confidence vote
It mostly comes back to the state of the public finances. France’s deficit is among the highest in the developed world right now.
Everyone spent enormous sums during the pandemic. But France has struggled, more than nearly everyone else, to bring its spending back down and, hence, to reduce its deficit. Successive budget plans have been announced and then shelved in the face of political resistance.
France’s government spends more, as a percentage of gross domestic product, than any other developed economy.
The government’s most recent budget plans called for what most people would see as relatively minor spending cuts – barely more than a couple of percentage points off spending, after which France would still be the third biggest spender in the world.
But even these cuts were too controversial for the French people, or rather their politicians.
Yet another prime minister looks likely to fall victim to an unsuccessful bill. Deja vu all over again, you might say.
A deeper issue is that the latest worsening in France’s public finances isn’t just a sign of political resistance, or indeed of a…
