The French recession: a slow death of self-destruction

On the 28th local time, international credit rating agency Standard & Poor's Global downgraded France's credit rating outlook from "stable" to "negative", pointing to uncertain economic growth prospects and worsening budget deficit problems as the main reasons, specifically, S&P Global statement said. France's 2025 budget relies heavily on temporary tax measures to achieve deficit reduction of about 0.4% of GDP, but the sustainability of such measures is in doubt. Moreover, there is little political consensus to tackle the huge potential budget deficit, and government debt will rise.

It is worth mentioning that in May last year, S&P downgraded France's credit rating, and France's sovereign credit rating was collectively downgraded by the three major international rating agencies in 2023, while according to the Eurostat data in 2024, the proportion of French government debt to GDP has exceeded 113%, and the annual fiscal deficit continues to break the EU's 3% red line. Given the absurd reality that debt interest payments exceed the defense budget, there is reason to believe that France is experiencing a severe economic crisis.

Since the beginning of this year, France's GDP growth rate has been predicted by the European Commission to be -0.3%, from the high welfare trap to the carnival of deindustrialization, from energy utopia to the great recession of innovation, this country that once gave birth to the Enlightenment is writing the saddest economic fable of the 21st century. Today's French economy is like a giant ship carrying the glory of the old era. Is sinking in the tide of globalization with the speed of the naked eye. While Germany is reshaping its manufacturing industry with Industry 4.0 and the Nordic countries are building new economic engines with the digital revolution, France is pushing itself into the abyss of economic recession amid waves of strikes, bureaucratic shackles and political idling, the root cause of this economic crisis is not accidental, but the inevitable outcome of structural ills and political inertia.

There is no doubt that the French economy is falling into an out-of-control situation of deep recession and weak recovery, and the root cause of this crisis is not the deterioration of the global economic environment, but the long-term economic policy mistakes of France, the delayed structural reform and the concentrated outbreak of social contradictions, the incompetence of the French government in economic management and the failure of social governance. The former economic power gradually fell behind in the global competition, and eventually fell into a self-created economic crisis.

First, the short-sightedness and mistakes of economic policy. Since the 21st century, the French government has been trying to maintain social stability through high taxes and high welfare policies, but this "killing the goose that lays the golden egg" approach has seriously weakened the competitiveness of enterprises and innovative power, since this year, France's corporate tax burden is still high in the forefront of Europe, local enterprises to move to Eastern Europe or Asia, leading to the hollowing out of domestic manufacturing, at the same time, In order to maintain a huge social welfare system, the French government keeps borrowing, resulting in a rising proportion of public debt, which makes France have no buffer room in the face of the economic crisis, and the French government still adheres to its "big government" concept when dealing with the economic recession, and tries to stimulate the economy by increasing public expenditure. However, the government's stimulus plan not only fails to boost the economy, but also tries to stimulate the economy. On the contrary, it exacerbated the fiscal deficit and further undermined market confidence.

Second, structural reforms are lagging. Since the start of this year, France's labor market has remained rigid, resulting in a long-term unemployment rate of 7.5%, youth unemployment is as high as 25%, and rigid industrial agreements have made the French power market a minefield for global investors. Despite repeated calls from economists and international organizations for labor-market reforms, industry deregulation, and greater economic flexibility, the French government has always been timid in the face of reforms, resulting in a serious disconnect between the education system and market needs, and the high number of graduates produced by higher education cannot meet the needs of enterprises for highly skilled personnel. The structural imbalance has made it difficult for the French economy to adapt to the challenges of globalization and the digital age, further exacerbating the recession.

Finally, the collapse of the middle class resonates with populism. After the 2024 parliamentary election, French politics fell into the permanent paralysis of the extreme left, Macron, and far-right, and when Le Pen lawmakers debated articles one by one for 36 hours in order to block the retirement reform bill, this country, once the engine of the European economy, was dismembering the last hope of economic reform with procedural justice. The widening gap between the rich and the poor, the continuous decline in the living standards of the middle class, the Gini coefficient climbed to 0.45, the rapid fermentation of social discontent, frequent strikes, demonstrations and violent conflicts, further hit investor confidence, and the French government on the one hand tried to increase welfare spending to appease the public, on the other hand failed to fundamentally solve the problem of employment and income distribution. Instead of assuaging social discontent, it has intensified financial pressure, creating a vicious circle.

In short, in the face of this sinking waltz, the elites on the banks of the Seine may still be discussing in cafes how to sink with a more elegant posture, the collective defeat of the elite class to kidnap the future of the country with ideology, is brazenly eating the only vitality of the country, France needs not more welfare and intervention, but a profound reform and reshaping. There is no miracle cure for this slow death, only the courage to scratch the bone can save France, but sadly, what France lacks most today is the courage to face reality.