France’s Financial Crisis: Excessive Welfare and Tax Reductions

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The Debt of France (reproduced from Debt Clock France)

 

France’s Severe Financial Crisis

Recently, France has undergone a severe financial crisis. France’s national debt is 3.4163 trillion €, which is 115.6 % of its GDP, meaning that it exceeds the country's total economic output. The national debt is also increasing rapidly. The government announced that the national debt is increasing by 10,875,870 € per hour. On September 9, 2025, François René Jean Lucien Bayrou, the former prime minister of France, resigned. Subsequently, Emmanuel Jean-Michel Frédéric Macron, the president of France, appointed Sébastien Lecornu as prime minister. However, he resigned 27 days after he was appointed, and the president appointed him to the same position again on October 10. This shows the severity of France’s political crisis and how many complexities there are in solving the national debt.

 

Cause Of Financial Crisis 1: Excessive Welfare

France has implemented many welfare policies, and they have become a burden on the government’s budget. As part of the welfare system, lower-income, young and unemployed people are given groceries, daily necessities, and they even get long-term rental apartments for low costs or free. Also, unemployed people can receive 60~75% of their recent wages for two to three years and every adult can receive 600 € as universal basic income in France. Moreover, the government provides a family allowance and child allowance depending on the number of children. The costs of these welfare programs take 31% of total GDP. It is significant and is closely associated with Bayrou. In July, he announced the austerity budget plan that aims to reduces the fiscal deficit up to 4.6% of GDP. However, it includes the reduction of the budget in welfare and public sectors also reducing public holidays. Many French citizens view it as a unilateral policy that causes suffering and has led to widespread protest.

 

Cause Of Financial Crisis 2: Excessive Tax Reductions

Macron has reduced taxes in many areas since 2017. The president abolished capital tax and decreased corporate tax from 33% to 25%. Xavier Ragot of OFCE, a French economic policy institute, mentioned that the cause for half the national debt of France is the permanent tax reduction policies. However, the policies have had little influence on the financial development of France. The Wall Street Journal declared that although the president was reducing tax, there was no financial benefit and the massive fiscal deficit resulting from tax reduction caused the severest political crisis in France.

 

What Do We Learn From It?

The case in France shows that excessive welfare and tax reduction can lead to a national financial crisis. According to the article by Minwoo Seo for Seoul Financial Newspaper in 2025, the national debt of Korea is predicted to increase to 487 trillion won between 2025 and 2029. The average annual national debt growth rate of Korea is 8.3% that is higher than the predicted rates of 5.0% for the US or 5.5% for Japan. It means that we can’t be sure that Korea will avoid the same path as France. I think that it is important to make the harmony of welfare and tax reduction to prevent a similar crisis with France. Excessive welfare and tax reductions for citizens and companies will eventually place the financial burden on everyone. It is crucial to achieve balance in this relationship and it gives the lesson to not only France but also Korea.

 

References

&#49436;&#48124;&#50864; (2025, October 3). 라면 끓일 5분 사이 나라 빚 11억 는다 [재정중독, 벌어진 악어의 입]. 서울경제. https://www.sedaily.com/NewsView/2GZ1PW3UT6

 

KyungHyangSinmun. (2025, September 20). [경제뭔데] 프랑스 재정위기, 지출 늘린 탓일까 감세 탓일까···한국에 주는 교훈은? 경향신문. https://www.khan.co.kr/article/202509210700001#ENT

 

&#44608;&#51452;&#50756; (2025, October 6). 프랑스 총리, 취임 27일 만에 사임...프랑스 국채 금리 급등. 한국경제. https://www.hankyung.com/article/202510067174i

 

“프랑스에선 무슨 일이”...’복지병 혼란’에 국가마비까지. 이데일리. (2025, October 2). https://www.edaily.co.kr/News/Read?newsId=01341526642329312&mediaCodeNo=257&OutLnkChk=Y

 

프랑스, 신용등급 잇따라 강등...정부부채는 GDP 맞먹고 복지 지출은 눈덩이. 조선일보. (2025, September 22). https://www.chosun.com/economy/weeklybiz/2025/09/25/HF4CEVGU7ZCPBORGVOUBDTQFFQ/

 

By Staff Reporter Noh Eunseo (1-7)