‘France has been especially hard hit by the recent global rise in bond yields. The rate on the benchmark 10-year government bond last week exceeded 5% for the first time since 2002. The spread between French OATs and German bunds (the eurozone’s safest asset) is now wider than 140 basis points, the most since the eurozone crisis of 2010-12.
‘Debt stands at 120% of GDP. Revenue is inadequate to Paris’s spending urges, despite or rather because of high tax rates that extract 51% of French GDP each year. Revenue from taxes on personal and corporate incomes and consumption is flat. Special levies such as a windfall-profits tax on energy companies generate less revenue than predicted.
‘All of this taxation alongside endemic overregulation is suffocating economic growth. GDP grew 0.8% last year, is expected to do the same this year, and if they’re lucky it’ll hit 1.1% in 2027. Perhaps this explains why French yields remain below the rates on U.S. Treasurys. In America, investors are betting on growth in addition to Washington’s fiscal dysfunctions.
‘If Paris won’t grow, can’t tax its way out of the fiscal hole, and can’t borrow, spending will have to be cut. This is turning French politics into a violent game of musical chairs in which no one wants to be the last special-interest group caught without a seat. The riots are the latest example. Previous instances include nation-wide strikes against increasing the retirement age, and the 2018 yellow-vest protests about taxes on diesel fuel’.
https://www.wsj.com/opinion/france-riots-schools-economy-jean-luc-melenchon-emmanuel-macron-9eb62d3e
