France’s debt crisis and student protests are being driven by the same underlying dispute over public spending, according to Nobel laureate Paul Krugman, who said generous pension commitments had come at the expense of the country’s younger generation.
The economics professor argued that rising French bond yields and demonstrations at schools were connected by years of political choices that prioritised retirement benefits while leaving education underfunded.
France’s official retirement age for full benefits was 62 in 2023, while the average actual retirement age was 60.4 – the lowest in Western Europe. Efforts by President Emmanuel Macron to raise the threshold to 64 have faced intense political resistance.
At the same time, students have taken to the streets over teacher shortages, deteriorating classrooms and school buildings that are not equipped to cope with rising temperatures. Protesters have blamed years of inadequate investment in public education.
“Thus the fiscal pressure caused largely by France’s very generous government pension plan has led to cutbacks in other spending, notably on education,” Mr Krugman wrote. “France is effectively handing over large subsidies to older French at the expense of everyone else. Mass national student demonstrations should come as no surprise.”
He said France was unusual among countries facing fiscal problems because of its continuing reluctance to confront the cost of retirement. The United States, he added, faced similar pressures as ageing demographics increased entitlement spending faster than revenues.
French debt crisis deepens political pressure
French 10-year bond yields recently reached their highest level since 2002, while the gap with equivalent German debt widened to its greatest point since the eurozone debt crisis in 2011. Those measures later eased, but concerns about the country’s finances remain.
France’s economy is experiencing weak growth, while its budget deficit is estimated at about 5.4 per cent of GDP. Debt is expected to rise from 119 per cent of GDP this year to 122 per cent next year, with higher borrowing costs adding to pressure on government finances.
Investors also questioned the credibility of the government’s latest plan after it failed to stop the rise in bond yields. Markets are pricing in increased odds of a French debt default, according to the analysis cited by Mr Krugman.
Marine Le Pen, the far-right leader described as the front-runner in next year’s French presidential election, has pledged to restore the official retirement age to 62. She has previously suggested reducing it to 60.
Mr Krugman said such a policy would be “extremely expensive” and reflected an unwillingness by France’s rising right to confront the country’s financial position. He compared the situation with what he called false promises and claims made by Donald Trump in the United States.
Strategists Thierry Wizman and Gareth Berry have also linked the protests to the country’s bond-market difficulties. They warned that prolonged demonstrations could increase pressure on the government to approve additional spending, worsening the debt position.
Higher spending could push French bond yields up further, making it more expensive for the government to borrow and intensifying the financial pressures behind the education grievances. The strategists said the relationship between the protests and rising yields could become self-reinforcing amid France’s political polarisation.
