France’s Fiscal Crisis: Citizen Experiment Reveals Path to Budgetary Stability
A recent policy experiment demonstrates that French voters are willing to support difficult budgetary decisions when presented with clear financial realities and transparent trade-offs, suggesting the core issue isn’t a lack of consent, but a failure of effective governance.
PARIS – For the second consecutive year, France has failed to pass a budget before the constitutional deadline of December 31st. As of today, January 19, 2024, Prime Minister Sébastien Lecornu’s attempts to forge a compromise among political factions appear poised to succeed, though potentially at the cost of abandoning President Macron’s signature supply-side economic policies.
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France’s public finances are deeply strained, with a fiscal deficit exceeding 5% of GDP. Prime Minister Lecornu is now aiming to keep the deficit below this level in 2026 and gradually reduce it to 3% by 2029. This represents a significant reversal, as France now lags behind countries like Spain and Portugal, which have successfully stabilized or reduced their debt ratios.
The question of why France stands apart – and what can be done to address the situation – is critical, not only for the nation itself but also for the stability of the eurozone and the European Union. With the 2027 presidential election looming, the stakes are high. A strong and stable France is essential for bolstering Europe’s “strategic autonomy” and maintaining a firm stance in an increasingly volatile global security landscape. France’s struggle to control its debt-to-GDP ratio poses a direct threat to the Franco-German economic partnership, often considered the engine of Europe.
The key to resolving this budgetary impasse lies in clearly separating financial necessities from political choices. Debt sustainability should be treated as a non-negotiable financial requirement, while decisions regarding the composition of fiscal adjustments – which public expenditures to preserve, reduce, or eliminate – fall within the realm of political debate. Currently, the lack of a structured framework to distinguish between these two categories allows politics to obstruct progress.
There is no viable path forward without this clear distinction. Achieving debt sustainability requires stabilizing the debt-to-GDP ratio, which, in turn, necessitates bringing the primary budget deficit (the deficit excluding interest payments) to zero in the medium term. While rapid fiscal adjustments could trigger a recession, a gradual and credible approach, coupled with potentially lower interest rates as a market response, need not have a detrimental impact on economic growth.
Such an outcome, however, depends on a consensus between the political center – what remains of President Macron’s parliamentary majority – and the center-left, specifically the Socialist Party. But is a responsible compromise possible in today’s fragmented political climate? To investigate this, a recent policy experiment challenged conventional wisdom.
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Led by Pascal Canfin, a Member of the European Parliament, former International Monetary Fund chief economist Olivier Blanchard, and others, researchers surveyed approximately 150 self-identified center-left citizens, tasking them with devising a seven-year fiscal adjustment plan. Participants were presented with the estimated €110 billion ($129 billion) in expenditure cuts or tax increases – equivalent to 3.8% of France’s 2024 GDP – required to stabilize the national debt. The citizens were then empowered to choose the specific measures to achieve this goal.
This overall constraint was widely accepted by the participants, who focused instead on selecting policies from a detailed menu of €175 billion in potential expenditure cuts and €170 billion in tax increases, prepared by the Conseil d’Analyse Économique. To ensure legitimacy, a supermajority threshold of 66% support was required for any measure to be considered “consensual.”
The experiment also allowed for consideration of investments with long-term benefits, such as funding for business research and development or programs to encourage senior citizens’ continued participation in the workforce. While these investments required offsetting cuts or tax increases, they broadened the range of available options. Over the first seven years, such measures totaled €34 billion, excluding investments in defense, the green transition, and public research, which represent a similar amount.
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Consensus emerged around a balance of 55% expenditure cuts and 45% tax increases. The proposed expenditure cuts involved a comprehensive restructuring of public spending, while the tax increases primarily targeted the upper middle class and eliminated certain “brown” tax expenditures (tax breaks favoring polluting industries). While the “consensual” measures fell short of the required €110 billion by €13.5 billion, a final round of voting resulted in an ambitious adjustment program. Ultimately, citizens opted to reduce public pension entitlements rather than implement additional taxes or seek further expenditure savings.
The key takeaway is clear: center-left voters are not inherently opposed to fiscal responsibility. When presented with the facts, they are capable of formulating solutions. What they reject is a lack of transparency, ad-hoc decision-making, and a lack of a credible long-term vision. The core failure, therefore, is not societal, but institutional.
France’s budgetary stalemate reflects a broader decline in strategic ambition. The experiment demonstrates that a path forward exists. When rules are clear, the timeline is credible, and trade-offs are transparent, citizens are willing to support difficult decisions. What is lacking is not public consent, but a robust and effective method. The choice facing France – and indeed, other democracies – is simple: govern deliberately, or be driven by events.
