France in Crisis: Why the Government Collapsed

In a rare and unprecedented turn of events, France's government has been ousted after a historic vote in the National Assembly, marking the first time in over 60 years that such a collapse has occurred. With 331 votes from both the left and right opposing the current administration, Prime Minister Élisabeth Borne resigned, leaving President Emmanuel Macron to face one of the biggest political crises of his presidency. However, the collapse of the French government is more than just a political failure; it represents a country teetering on the edge of an economic disaster.

The Context: France’s Economic Struggles

While the vote itself was a clear sign of political turmoil, the real urgency lies in France’s economic situation. The country is facing a growing financial crisis, primarily due to its ever-rising national debt, which now stands at 3.2 trillion euros—a number more than double the European Union's debt limit of 60% of GDP. For perspective, at one point, France's borrowing costs were higher than Greece's, a country that has been plagued by crippling debt for years. This comparison is worrying, to say the least, and highlights just how severe the economic instability is.

The French economy has been in stagnation for several years. Since the pandemic, recovery has been slow, with France consistently missing the growth targets of 2-3% that economists typically expect from a healthy economy. With such high debt levels and an inability to spark consistent growth, the country is facing a crisis of confidence among investors and businesses alike. The financial instability is causing uncertainty, which is detrimental to long-term economic recovery and stability.

The Spending Problem: How Macron’s Policies Worsened the Situation

France's financial struggles can be traced back to its government's spending decisions. Despite repeated warnings, President Macron has pushed for large-scale spending initiatives. In his first term, Macron aimed to alleviate economic hardship with substantial public expenditure. In addition to raising the minimum wage and reversing planned tax increases, the French government poured billions into the economy to offset the economic fallout of the pandemic. For instance, the government kept private sector workers on payroll at 70% of their wages, preventing mass unemployment but also increasing public spending.

However, this approach had consequences. While the government’s actions helped avert a deeper crisis in the short term, it also created a growing problem of “zombie companies”—businesses that received just enough government subsidies to survive but couldn’t thrive or grow. Over time, these businesses became less competitive and more reliant on government support, stifling much-needed structural economic changes.

Former European leaders have warned that prolonged subsidies can hinder necessary economic reforms and ultimately leave countries with a “zombie economy.” This is precisely what France is facing today, with layoffs across multiple sectors and businesses struggling to innovate or remain competitive.

Macron’s Political Gamble: A Snap Election That Backfired

In a bid to consolidate power, Macron called for a snap election in July, hoping to secure a stronger mandate to push through his economic policies. However, this gamble did not pay off. His centrist political block came in second, and the far-right National Rally party, led by Marine Le Pen, gained ground. Meanwhile, the left-wing coalition, NUPES, emerged as the largest group in the National Assembly but was unable to secure a majority. This fractured political landscape left Macron stuck between competing political forces, unable to effectively manage the government.

Macron’s solution to the political chaos was the appointment of a new prime minister, Élisabeth Borne, who was tasked with navigating France's economic crisis. Borne, a respected figure in political circles, had a reputation as a skilled negotiator, especially for her role in Brexit discussions. Yet, despite her competence, the situation in France had already reached a point where even the most capable leadership could struggle to turn things around.

A Steep Financial Cliff: What’s at Stake?

The central issue France faces today is its spiraling debt, which threatens to drag the economy deeper into crisis. As mentioned earlier, the country's debt is more than double the EU’s limit, and Macron’s previous policies, which aimed to address poverty and unemployment, only made the situation worse by adding to the deficit. Cutting public spending to reduce the debt would mean painful austerity measures, including tax hikes and cuts in social services, which are highly unpopular.

The reality is that France’s government has failed to manage the national finances effectively, and now the country faces a financial precipice. With such high debt levels and low growth, France may be heading toward a crisis similar to that of Greece, whose economy was ravaged by debt and austerity in the past decade. The difference now is that the political instability exacerbates the situation, making it harder to find a clear path forward.

What Happens Next?

As France grapples with the aftermath of the government collapse, the country finds itself at a critical juncture. Macron remains defiant, accusing his political opponents of acting against the national interest and vowing to rebuild the government from the ground up. But with economic problems mounting, the question remains whether he can regain control and restore stability.

In the meantime, France will have to reckon with its unsustainable debt and stagnant economy. The coming months will be crucial in determining whether the country can avoid a full-blown financial collapse and whether Macron’s government can recover or be replaced by a new, more effective political leadership.

Ultimately, the story of France’s political crisis is one of mismanagement, economic missteps, and a deeply divided political landscape. Whether Macron can salvage the situation or whether France will spiral further into economic chaos is a question that will define the future of the country for years to come.