Riots, Rates, and Risks—The Economic Roots of France’s Unrest

News Analysis

Unrest has gripped France as nationwide protests over the rising cost of living have swept across the eurozone’s second-largest economy.

Like other countries, France has seen soaring fuel prices from the war in Iran, worsening inflation pressures. Add to that stagnating wages and high unemployment, and hundreds of thousands of people have taken to the streets—demonstrations that have been overshadowed by looting and violence.

But the roots of France’s latest turmoil are years in the making, reflecting long-term economic and political pressures rather than a sudden crisis.

Here is what to know about France’s economic challenges.

Inside France’s Economy

France’s inflation troubles have intensified since the U.S.–Iran conflict began in late February.

In September, the annual inflation rate reached 3.1 percent—the highest level since January 2024—driven almost entirely by a sharp acceleration in energy prices.

But the cumulative effect has weighed on French households. Consumer prices have climbed more than 23 percent since President Emmanuel Macron took office in 2017.

Meanwhile, rising prices have eaten into workers’ earnings. Since peaking at 4.7 percent in early 2023, wage growth has steadily declined and flatlined late last year.

In the April–June period, wage growth averaged 1.7 percent, up slightly from 1.6 percent in the first three months of the year.

Economists doubt France will wrestle with persistent inflation threats, citing weaker consumer demand and a soft labor market.

“At this stage, a broad-based increase in inflationary pressures in France appears rather unlikely,” Charlotte de Montpellier, senior economist at Dutch bank ING, said in a research note.

Employment conditions have rapidly deteriorated over the last two years.

The unemployment rate rose to 8.3 percent in the second quarter—the highest since the third quarter of 2020—from 8.1 percent in the previous quarter. For young people, the jobless rate is a lot higher, inching closer to 22 percent.

The overall economy has stagnated in the last couple of years, with France’s GDP contracting 0.2 percent in the first quarter and stalling in the second quarter.

“France has been a notable source of weakness,” Adam Turnquist, chief cross-asset strategist for LPL Financial, said in an emailed note to The Epoch Times.

ING economists forecast GDP growth of just 0.3 percent in 2026 and 0.6 percent in 2027, and “the risks are tilted towards another downward revision.”

What Moody’s Says

France avoided a credit downgrade on Oct. 23 after Moody’s maintained its Aa3 rating. However, it maintained its negative outlook on the eurozone’s second-largest economy, citing “the fragmentation of France’s political landscape.”

“This political instability, also visible in the current social tensions, risks hampering the French government’s ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and durable increase in borrowing costs, thus leading to a more rapid weakening in the sovereign’s key credit metrics than we currently expect,” Moody’s stated in the report.

Moody’s said that it could restore France’s outlook to stable if the government narrowed the deficit.

Various indicators suggest the country’s fiscal conditions are worsening.

The country’s debt-to-GDP ratio is 119 percent, and the government warned it could reach almost 122 percent next year. Its deficit-to-GDP ratio is 5.5 percent, higher than the 3 percent limit for the 27-member European Union.

France also faces more than $1 trillion in debt maturing by 2030. The cost of insuring against a French default—also known as a credit default swap—has rocketed to the highest in more than a decade.

“Rising debt and deficit concerns have pressured French government bonds, while a deeply divided government has struggled to restore confidence,” Turnquist said.

“Higher interest rates and energy prices have further complicated the macro backdrop.”

Bond Markets Take Notice

Across advanced economies, bond markets have begun repricing interest rates, sounding the alarm over ongoing debt and deficits.

France has been no different.

Borrowing costs have accelerated, with France’s 10-year government bond yield crossing the 5 percent mark for the first time since 2002. It also rose above the U.S. 10-year Treasury bond yield for the first time in 13 years.

Likewise, France’s short- and long-dated bond yields have climbed to multi-year highs.

Higher debt-servicing costs create a vicious cycle for the broader economy, de Montpellier says.

“At the same time, the renewed deterioration in financial conditions is further weakening an already very poor growth outlook by increasing the cost of credit,” she said.

These developments have weighed on the CAC 40 Index—France’s leading stock market benchmark index—which has declined almost 5 percent this year.

Uncertainty Ahead

With the recent protests centered on living costs, public services, and schools, policymakers will likely have little room to implement austerity measures that would garner parliamentary support and satisfy investors.

As a result, uncertainty remains high around the 2027 budget and next year’s presidential election.