“Streets Burn as National Debt Piles Up”: Hardship Fuels Public Anger, Putting European Austerity to the Test

Energy costs and defense spending rise following the Russia-Ukraine war
Protests over economic hardship and demands for support spread across Europe
Limited fiscal room adds to the burden of addressing people’s livelihoods

France has been engulfed by mass protests as citizens take to the streets over school conditions and the cost of living. Anger from organized labor has compounded grievances that began in schools, while arson and looting have swept major cities. Yet with national debt reaching 119% of gross domestic product (GDP), the government is struggling even to find the money to meet protesters’ demands. As protests against economic hardship continue elsewhere in Europe, where energy costs and military spending have increased since the war in Ukraine, governments face the difficult task of cutting spending despite public anger.

Protests at 110 Locations Across France, With Arson and Looting in Major Cities

According to Politico Europe and other outlets on the 18th (all dates hereafter are local time), mass protests took place across France the previous day, with demonstrators clashing with police throughout major cities. Participation in 110 marches nationwide reached 550,000, according to authorities, and 800,000, according to organizers. People from diverse backgrounds joined the rallies, including high school and university students, union members and participants in the “yellow vest” movement. In Paris, large crowds marched while waving national flags and singing the national anthem. At Place de la République, some masked participants threw fireworks and paving stones at police, who responded with tear gas and water cannons. Numerous metro stations near the Champs-Élysées, the presidential palace, parliament and government buildings were also closed, disrupting travel through central Paris.

A succession of arson attacks and looting by some participants during the protests caused widespread damage to shops and public facilities. Around Place de la République in Paris, paving stones torn up during clashes and shards from shattered shop windows littered the streets. Supermarkets, mobile phone shops, pharmacies and even car dealerships were looted. In the central city of Limoges, a fire at the 19th-century city hall caused its roof to collapse. In Lyon, masked individuals were seen tearing down a tourist information center’s sign, smashing its facilities and setting it on fire. In the southern port city of Marseille, some protesters stormed the city hall lobby and damaged shops and police stations. Alexandre Bompard, chief executive officer (CEO) of retailer Carrefour, said 50 of its stores had been damaged, including 20 that were looted, with losses reaching tens of millions of euros.

Labor Joins Anger That Began in Classrooms

The protests that shook the country began with students’ complaints about poor school conditions. Demonstrations that started last month at high schools on the outskirts of Paris brought a flood of demands to address teacher shortages and aging school facilities. A student at Paul Éluard High School in Saint-Denis called for better learning conditions, saying temporary toilets had no running water and rats and cockroaches roamed the school. Students preparing to enter university also strongly opposed the university application platform Parcoursup. They said opaque selection criteria and evaluation processes at individual universities made admission outcomes difficult to predict, while complicated application procedures heightened anxiety over admissions. Student groups demanded an end to selection through the platform and an increase in university places.

Workers and other citizens joined the student protests as rising living costs squeezed household finances. Gasoline, energy and food prices have risen in succession over recent months, increasing the burden on households, and calls for lower prices and income support grew louder at rallies. The General Confederation of Labour (CGT) also joined, calling for higher wages and pensions and the protection of public services. Students demanding more school staff and better facilities thus joined forces with labor groups seeking improved living conditions. The movement spread rapidly through social media. A proposal for a rally against surging fuel prices appeared on TikTok last month, followed by calls encouraging student participation. According to social media analytics firm Visibrain, posts in France mentioning the rally on the 17th totaled 460,000 since the 27th of last month.

France’s National Debt Nears EUR 3.6 Trillion

However, the French government’s fiscal room to increase education and welfare spending as protesters demand has narrowed considerably. According to France’s National Institute of Statistics and Economic Studies (INSEE), public debt stood at EUR 3.5955 trillion at the end of June this year, equivalent to 119% of GDP. Debt rose by EUR 59.6 billion in the second quarter alone, pushing the debt-to-GDP ratio up 1.5 percentage points from 117.5% in the previous quarter. The finance ministry projected that the ratio would rise to 119.3% at the end of this year and 121.7% next year. Committing additional funds to school repairs and cost-of-living support would inevitably add to the burden of already swollen debt.

Underlying the mounting fiscal burden is a spending structure that exceeds government revenue. According to the International Monetary Fund (IMF), France’s public spending amounted to 57.5% of GDP last year, while its fiscal deficit reached 5.1% of GDP. This means there is little room to expand new support, as borrowing is needed even to maintain existing programs and public services. The IMF previously identified revenue shortfalls caused by weak domestic demand and overspending in the social security and local government sectors as reasons why public finances deteriorated more than expected in 2023–2024. Rising pension and healthcare costs associated with population aging, along with increased defense spending, were also cited as factors that would put pressure on future public finances.

Table 1. France’s Fiscal Position and Constraints on Expanding Spending

Government Bond Yields Near 5%, Pressuring France’s Public Finances

Interest on the growing debt is also eating into the budget. France’s interest payments on public debt will reach EUR 79 billion this year, and the government projects that the cost will rise to EUR 91 billion next year. That means an additional EUR 12 billion must be spent on interest alone in a single year. Against this backdrop, the yield on France’s 10-year government bonds recently approached 5%, raising the cost of new borrowing as well. As bonds issued during the low-interest-rate era mature and are refinanced at higher rates, funding available for education, welfare and other areas will be constrained.

Investors buying government bonds are also growing more cautious. Goldman Sachs economist Alexandre Stott said France’s weak growth, persistent fiscal deficits and political uncertainty ahead of elections were fueling market concerns. According to IMF figures, foreign investors held 55% of France’s public debt at the end of last year, leaving the country exposed to investor sentiment in international financial markets. In an earlier assessment of the French economy, the IMF also noted that a lack of political support had prevented the adoption of further reforms. It warned that rising policy uncertainty ahead of next year’s presidential election risked delaying deficit reduction and structural reforms.

Europe Faces Living-Cost Pressures on Top of War Costs

The situation is little different in other European Union (EU) countries. Protests against high prices, public services weakened by austerity and soaring housing costs are spreading across Europe. In Italy, demonstrations against low wages, surging prices and deteriorating school conditions took place in major cities including Rome, Milan, Turin and Bologna, leading to clashes with police. The Italian General Confederation of Labour (CGIL), the country’s largest trade union, has announced a general strike for the 20th of next month. In Belgium, where education budgets were cut under the weight of public debt, high school students continued protesting, mainly in Brussels and Liège. In Portugal, where house prices surged 16% year on year in the second quarter of this year, demonstrations were held over rising housing costs. Political and economic instability is deepening across Europe, with housing protests in Spain triggered by the forced eviction of an 87-year-old continuing and pushing Prime Minister Pedro Sánchez into an early general election. Complaints about the difficulty of affording education, rent and daily necessities are erupting simultaneously across European countries.

A major factor intensifying Europe’s economic difficulties has been the Russia-Ukraine war. Following Russia’s invasion in 2022, reduced supplies of Russian energy to Europe sent natural gas and electricity prices soaring. Because Europe’s electricity market is structured so that higher gas prices drive up wholesale electricity prices, the shock quickly spread to households and industry. Disruptions to exports from Ukraine, a major supplier of grains and vegetable oils, added upward pressure on food prices. Households had to spend more on heating and groceries, while businesses faced higher energy and raw material procurement costs.

Cuts to Government Spending Become Unavoidable

Security concerns arising from the war have led to military buildups, increasing governments’ fiscal burdens. According to the EU Institute for Security Studies, member states’ defense spending rose 74%, from EUR 239.8 billion in 2022 to EUR 417.6 billion last year. The European Defence Agency (EDA) projected that defense spending would reach EUR 454 billion this year, with its share of GDP rising from 2.2% last year to 2.4%. Joint borrowing to fund support for Ukraine has also been pursued. The EU’s EUR 90 billion loan to support Ukraine in 2026–2027 is to be financed through EU borrowing, with approximately two-thirds allocated to defense, including the procurement of military equipment. As defense spending expands, rising demand for support for households and businesses struggling with high prices is adding to pressure over budget allocations. Reflecting weak economic activity, interest costs and increased defense spending, the European Commission projected that the EU’s overall fiscal deficit would widen from 3.1% of GDP last year to 3.6% next year.

With fiscal burdens mounting, governments have little room to postpone austerity further despite protesters’ opposition. The longer spending adjustments are delayed, the more borrowing and interest costs accumulate, potentially reducing even the funding available to maintain public services. Speaking in the lower house on the 13th, French Economy Minister Roland Lescure noted that money spent on debt interest leaves less available for hospitals, schools and investment in the future, and urged lawmakers to pass a budget that would reduce next year’s fiscal deficit to 5% of GDP. The French government’s view is that the burden of restoring fiscal health cannot be left to only certain segments of society. Public Accounts Minister David Amiel likewise explained that specific groups, such as the wealthy, could not shoulder most of the burden required for fiscal adjustment on their own, emphasizing that there was no time left to delay debt reduction. The government must therefore cut spending to match its limited resources, even as the public demands increased expenditure.