With almost zero growth and massive and sharply increasing public debt, the French economy is facing challenges to which it is urgent to provide appropriate responses. But political instability and the lack of a parliamentary majority following the dissolution of the National Assembly a year ago have prevented the government from dealing with this unprecedented situation. However, and this is not the least of the paradoxes, the French have never been so rich, even if this wealth is very unevenly distributed, and large companies so profitable.
At the end of 2023, households' financial assets exceeded €6,000 billion, the latest known figures, once their consumer loans are deducted. In addition, there are nearly 8,000 billion in real estate, once the debt contracted to acquire them is deducted. Their wealth increased further in 2024 and early 2025 thanks to their financial savings. Its rate in the 1st quarter reached a record 9.8% of gross disposable income and there is no reason to believe that this trend will be reversed in the years to come.
The reason generally given for this behaviour is uncertainty about the international environment and domestic politics. Added to this would be the threats that would weigh on the future of pension systems and more generally on the country's financial situation. But these reasons are not enough because they omit two essential factors, the inequality of the process of enrichment and the ageing of the population with the increase in life expectancy. The higher the income, the lower the share of expenditure corresponding to needs, which automatically increases the savings rate and wealth. Similarly, as age advances, consumption needs, excluding care and accommodation, decrease. You rarely buy a new car after the age of 80.
France is on the eve of a political crisis caused by a reform of the general pension system that has been rejected by trade unions and a large majority of French people. The increase in the retirement age is supposed to restore the balance of this system in the long term. But this vision does not take into account demographic and financial parameters, nor the surplus situation of the supplementary schemes. With the increase in life expectancy, the new retiree will benefit from his or her retirement as well as from his or her parents' inheritance and the savings he or she has accumulated. Even if deep inequalities will be created that will have to be addressed, the overall situation of retirees in the future will be much more favourable than that of previous generations.
The solution put forward with the postponement of the retirement age does not remedy these inequalities, quite the contrary, whereas a solution would make it possible to deal with them by curbing the accumulation of the reserves of the supplementary schemes by raising the contribution ceiling. This has only been reassessed by 1.6% this year. A larger increase that is renewed each year would make it possible to quickly bring the general scheme back into balance. The reserves accumulated by the two main supplementary schemes, AGIRC-ARRCO and IRCANTEC, are close to €100 billion, invested in the financial markets. To defend the existence of what should be called a hoard, it is explained that in the event of a crisis, this would guarantee the payment of supplementary pensions. But this argument is absurd since in the event of a serious crisis, the markets would fall and a good part of the reserves would disappear. The State has the means to restore the balance of the general system, not by forcing employees to work longer but by slowing down the accumulation of wealth that further increases inequalities between pensioners.
The situation of large companies is also very favourable, thanks in particular to the significant reductions in charges and tax cuts decided by the State, which have contributed to the deterioration of public finances. The dividends paid by CAC 40 groups have thus increased between 2018 and 2024 from 51 to more than 70 billion, to which are added several billion each year devoted to share buybacks.
France now finds itself with a public debt of 113.2% of GDP, and a public deficit forecast for 2025 of 5.8% of GDP, almost double the average deficit of the euro zone. The trends currently observed are not improving and the government has not yet convinced anyone of its ability to reduce it by 40 billion in 2026, hence an alarmist discourse that even goes so far as to imagine that France could be put under the supervision of the IMF.
This hypothesis is unfounded since three other major economies, the United States, Japan and the United Kingdom, have higher levels of public debt without this being mentioned in their cases. In addition, France is protected by the euro and has a balanced balance of payments on current account. Moreover, the State has no difficulty in calling on the market since each issue is oversubscribed, most often three times, and the spread with Germany has been stable for two years at around 70 basis points.
The ratios used are biased by using GDP in value as the denominator. However, France has, this is new and we should welcome it, the lowest inflation rate in the euro area, which mechanically increases the debt rate. But the very high level of public spending is accompanied by a deterioration in the quality of public services, which is a major paradox. Rather than asking the French to work more, the government would do better to ask its services to work better, which would be a source of both budgetary savings and economic efficiency.
The costly bureaucratization of France has resulted from a series of reforms whose result, if not objective, is to increase the capacity to produce legislative and regulatory texts: lengthening of parliamentary sessions, increase in the number of elected representatives, abolition of the accumulation of mandates, creation of larger regions leading to the maintenance of larger numbers in the field. This public apparatus not only has a heavy operating cost, but it weighs on the lives of companies and households and therefore on productivity and wealth creation. Public finances are thus doubly penalised: more spending and less tax revenue due to the resulting economic stagnation.
It is therefore not the French who are responsible for the deterioration of the country's financial situation but the State and those who govern it. It is always easy to blame a deteriorating situation on others. But this does not lead to the adoption of appropriate solutions. Similarly, using an alarmist discourse to push through unpopular measures and thus dispensing with the necessary institutional reforms will not help the country to make progress on the road to restoring its public finances.
France therefore needs two new orientations, institutional simplification and a rebalancing of its economic policy. The first will take time, but an irreversible mechanism of debureaucratisation will reduce public costs in a permanent and sustainable way while facilitating the return of growth. The second concerns the reform of the so-called "supply-side policy" which has led to a concentration of wealth widening inequalities between households and between companies. Time is running out because the real threat is not the IMF but the rise of populism.