Political Economics: Riots in France? They Could Happen Here

“Are you an American who's enjoying the spectacle of the very Gallic rioting in France? Resist the temptation to gloat. We aren't so different.

 

What's happening in the streets of Paris and other cities is about fiscal policy. Seriously. Superficially, the country is witnessing student protests (many of them violent) over teacher shortages and decrepit school buildings. But this is only the latest in a series of public distempers stirred up by organizations of the left such as unions to force an allocation of evaporating public resources toward their favored interests.

 

Before the student riots kicked off, there was a one-day national strike by civil servants, firefighters and others to protest government-wage freezes. With a similar movement in autumn 2025, national marches against the government budget are becoming an annual tradition.

 

The street fighting is brutal because the budget math is inexorable. France is broke. Government debt stands at 120% of gross domestic product and is rising fast as annual fiscal deficits of 5% of GDP are becoming the norm.

 

Borrowing costs are soaring as the yield on the benchmark 10-year government bond last week briefly exceeded 5% for the first time since 2002. This is lower than the 10-year Treasury yield in the U.S., but that's because America's investors anticipate stronger economic growth. Compared with low-growth European peers, France stands out in all the wrong ways. The spread between French bonds and German bunds (Europe's safe asset) is as wide as during the 2010-12 eurozone crisis. France is paying more to borrow than Italy -- or Greece.

 

And because bond yields exceed any plausible estimate of economic growth, the debt pile can only increase while debt-service costs soar. The young rioters demanding more education funding aren't fighting for a bigger piece of a shrinking pie. They're fighting for a piece of a pie that may not even exist.

 

Blame les boomers. France has also recently seen long and turbulent protests related to the old-age pension, France's equivalent to Social Security. These ran from 2019 to 2023 (with a long break for the pandemic) and killed first President Emmanuel Macron's comprehensive overhaul of the retirement system and then a more modest attempt to raise the retirement age to 64 from 62.

 

This has had two definite consequences, and maybe an intriguing third one. One result is that the budget is now all but unbalanceable. The state pension in 2025 consumed 422 billion euros, nearly 25% of the government's total budget and 14% of GDP. Paris will never get its numbers to add up if such an expenditure can't be debated or reformed.

 

The other consequence is stalled economic growth. Retirement reform is only partly about fiscal math. Because a country's old-age entitlement program sets the rules for how long workers stay in the labor force, shapes the incentives for saving and investment, and is an important determinant of the overall level of taxation, it has a profound effect on economic growth. France has abandoned any attempt to get this right.

 

A third consequence may be appearing in bond markets now. Since the pension reforms failed, bondholders have been on notice that they might not be France's senior creditors after all, as Stanford economist Hanno Lustig argues. The senior-most claimants on the French state instead are its pensioners.

 

This isn't the case legally, but in matters of sovereign solvency politics always trumps the law. In thwarting pension reform, French politicians and voters signaled a preference for rolling the dice on an unsustainable debt burden rather than cutting old-age benefits. That alone, Mr. Lustig suggests, could explain part of the surge in French yields of recent years that now contributes to its budget miseries.

 

America is different how exactly? I count two interconnected ways. One, our economy continues to grow at a healthy clip, because our regulatory regime is more tolerant of risk-taking and our tax regime is less punitive than France's. This depends to a large degree, however, on our acceptance of a welfare state that remains less generous than Europe's.

 

Two, Social Security remains -- for now, just barely -- reformable. Reform is baked into its design as the depletion of the trust fund for the old-age part of the program will force hefty benefit cuts in 2032 absent congressional action. If Mr. Lustig's analysis of French public finance is correct, this possibility of Social Security reform is an important stabilizer in America's own debt market. We haven't yet subordinated our creditors to our retirees.

 

Yet. As if the Social Security debate weren't fraught enough, the example of French dysfunction has just added another dimension.” [1]

 

1. Political Economics: Riots in France? They Could Happen Here. Sternberg, Joseph C.  Wall Street Journal, Eastern edition; New York, N.Y.. 09 Oct 2026: A15.