French fumbles reflect the failure of Europe’s centrists

Even by the dysfunctional standards of France’s recent political trajectory, it has been an eventful month in Paris. A prime minister resigned after failing to push through fiscal reforms but then was reappointed by President Emmanuel Macron to try again. The theft of jewellery worn by 19th century French royalty from the Louvre as the museum’s doors opened on 19 October seemed like a metaphor for the country’s problems. A country that is a byword for high-end luxury has an economy dominated by companies such as LVMH and Hermes and an overextended state. (A request for additional funding to better protect the Louvre had been pending for some time.)

- RAHUL JACOB

The trouble is the very wealthy in France use their clout to fight off higher taxes, despite effectively paying only half the average rate of income tax by shielding their wealth in holding companies. An economist’s proposal for a wealth tax on people worth more than €100 million has been derided by LVMH owner Bernard Arnault as a reckless attempt to “destroy the French economy.”

Since the snap parliamentary election in 2024 that weakened the government's position instead of strengthening it, the Macron administration has had to rely on support from leftist parties to pass legislation. At that end of the political spectrum, melodramatic overreactions to reasonable reforms are hardly unusual. The left has blocked attempts to reduce the generous holidays France is renowned for, even preventing the cancellation of two bank holidays. A government move to increase the retirement age to 64 from 62, aimed at reducing pension costs and the fiscal deficit, had to be postponed.

That deficit is now near 6% of GDP and well above the Eurozone average, beating Italy and Greece. Its widening is a function of large-scale state spending in the wake of the pandemic (and then of the energy crisis after Russia attacked Ukraine) and Macron’s tax cuts in 2018. Gross public debt as a percentage of GDP is about 113%, well above the Eurozone average.