Finley is a Slugger reader from Belfast
Another PM has fallen in France – but the problems lie deeper
“In France, as in much of the world, yields have risen this year on concerns that industrialised democracies will increasingly struggle to meet their obligations due to ageing populations and inadequate growth.”
Politico reports the situation in France:
“France’s benchmark borrowing costs rose above those of Italy on Monday after the shock resignation of Prime Minister Sébastien Lecornu forced financial markets to confront the extent of the country’s political dysfunction.
… In France, as in much of the world, yields have risen this year on concerns that industrialized democracies will increasingly struggle to meet their obligations due to aging populations and inadequate growth. Japan, perhaps the most extreme illustration of the phenomenon, saw its 10-year yield hit a 17-year high Monday on expectations that its likely new leader, Sanae Takaichi, will return to the same kind of high-borrowing path taken by the late Shinzo Abe.
… Macron has now burned through seven prime ministers in eight years. Macron had appointed Lecornu only 27 days ago after François Bayrou, his predecessor, failed to get parliamentary support for €43.8 billion worth of spending cuts to bring the budget deficit down from an estimated 5.4 percent of gross domestic product to 4.6 percent next year.
Lecornu’s resignation once again illustrated that “there is no majority in parliament for a budget to be passed,” according to Helen Thomas of the consultancy Blonde Money.”
France is in political free-fall. Another prime minister has resigned – the seventh in Emmanuel Macron’s presidency – following yet another failed attempt to pass a national budget. Markets responded immediately: French borrowing costs rose above those of Italy, a reversal that stunned investors who have long viewed France as one of the eurozone’s more stable economies.
But the underlying issue isn’t just the churn of leadership or fiscal gridlock. What’s driving this instability — and increasingly threatening the viability of advanced democratic states — is a structural demographic shift. The ageing of populations across the developed world is no longer a distant challenge. It is now a live crisis, and its financial, political, and social effects are beginning to cascade.
Demography is Now Driving Financial Risk
What was once a concern for policy planners and long-term forecasters is now visibly shaping the markets. Bond yields — the cost at which governments borrow money — are climbing not just because of inflation or monetary tightening, but because of growing doubts about whether ageing states can meet their future obligations.
In France, pension and healthcare costs are surging as the population ages and retires. Meanwhile, the working-age population — the base that sustains these systems through taxation — is shrinking. The demographic dependency ratio is worsening. And unlike in the past, economic growth is no longer strong enough to paper over the gap.
This means governments must either:
- Raise taxes on a dwindling workforce,
- Cut benefits to politically powerful older voters,
- Or borrow more — which is becoming harder and more expensive.
France has attempted all three in recent years. It hasn’t gone well.
Political Paralysis: A Government Without a Budget
Prime Minister Sébastien Lecornu, who resigned after just 27 days in office, was unable to pass a budget or secure support for €43.8 billion in spending cuts aimed at reducing the deficit. His predecessor, François Bayrou, failed in the same task. Macron’s government has repeatedly used Article 49.3 of the French Constitution — a controversial mechanism that allows the executive to bypass parliament to force through a budget — only to face confidence votes and public backlash.
The problem is simple: there is no political majority in France willing to impose deep cuts to pensions and social spending. And yet, there is also no fiscal path forward without doing exactly that. Centrist technocrats keep trying to close the gap with reforms; they keep failing. Each time, the political centre weakens further, and more radical parties grow stronger.
The Spiral of Cost and Collapse
At the same time, the economic consequences of these demographic and political constraints are deepening. As debt rises and investors demand higher yields, the cost of servicing debt increases. That money has to come from somewhere. Increasingly, it comes from squeezing public services or delaying needed investment.
Slower public investment has knock-on effects: infrastructure deteriorates, innovation lags, productivity growth stalls. Private sector investment also takes a hit, as higher interest rates deter borrowing. As growth slows, tax revenues weaken, making the fiscal hole deeper.
A vicious cycle takes shape:
- Ageing reduces the workforce and increases welfare costs.
- Governments struggle to cut spending or raise taxes.
- Markets punish fiscal weakness with higher interest rates.
- Debt servicing crowds out investment and growth.
- Lower growth leads to further fiscal deterioration.
And round it goes — a negative feedback loop of demographic, fiscal, economic, and political decline.
Populist Substitutes and False Promises
Into this vacuum, populist parties are rising. In France, the National Rally (formerly the National Front) is now a serious contender for power. These parties promise to restore control and protect national interests, but their platforms often include policies that would worsen the structural problem: anti-immigration laws that restrict labour supply, protectionism that reduces competitiveness, and fiscal populism that ignores debt constraints.
Immigration, whatever its political difficulties, is one of the few viable ways to expand the workforce in an ageing society. But it is precisely what the populist right seeks to limit. The result, if these parties take power, may be a temporary sense of sovereignty regained – but at the cost of further economic and demographic deterioration.
The Risk Is Systemic, Not Just National
France may be an early warning case, but it is far from alone. Japan has already reached the far end of the demographic curve, with more than 29% of its population over the age of 65. Italy and Germany are not far behind. The United States faces similar pressures in the coming decade, with major trust fund insolvencies looming.
For years, policymakers in developed democracies have deferred difficult reforms – sometimes out of political caution, sometimes out of denial. But as the French case shows, the time for deferral is ending. The bond market, once patient, is beginning to respond. Political systems are beginning to buckle.
This is not simply a story about budget rules or unpopular pension reforms. It is a story about whether the modern welfare state – in its current form – can survive the demographic transition already underway.
The UK is on a similar path. While its population is ageing more slowly than in parts of continental Europe, pressures on pensions, healthcare, and the broader welfare state are mounting. With weak growth, stagnant productivity, and rising debt, the country faces hard fiscal choices that no major party seems willing to confront. Political avoidance has become the default, even as the long-term risks compound.
Conclusion: A Model Under Strain
The liberal democratic state as we know it was built on a set of assumptions: sustained economic growth, expanding populations, and rising productivity. All three of those foundations are now under strain.
France’s current crisis is not an outlier – it is a glimpse of the future. Unless ageing democracies can square the circle of rising costs and shrinking workforces – either through productivity gains, smart immigration, or new social contracts — the spiral of political dysfunction and fiscal decay will accelerate.
The collapse of state viability is no longer a hypothetical concern. It is beginning to play out in real time. France may simply be the first to show us what happens when modern societies grow old — and run out of options.
This is a guest slot to give a platform for new writers either as a one off, or a prelude to becoming part of the regular Slugger team.
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