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France is the second-largest economy in the EU and is rapidly spiraling into Europe’s number one problem child. France’s Prime Minister, Francois Bayrou, proposed a hopeful solution to save the country from its economic debt crisis: slash 44 billion euros in funding. To Bayou’s dismay, his idea was unsuccessful. A no-confidence vote ousted the prime minister and marked the third time the government has collapsed in less than two years.
In Bayrou’s defense, as Frederik Ducrozet, head of Macroeconomic research at Pictet Wealth Management, put it, “There is no upside scenario, there is no way out, there is no credible scenario where you end up with the same amount of fiscal consolidation” (Source: Reuters, Sept 8, 2025). To understand where Ducrozet is coming from, you have to look at France’s debt crisis: It’s difficult to escape. Debt has reached 3.3 trillion, which is 114% of the GDP-a dangerously high level. Adding to fears, the parliament’s division and France’s fragmented lawmakers have yet to propose a feasible solution, causing businesses and households to hold back from investing.
When uncertainty hits the market, wallets tend to cry. Therefore, the Euro is currently experiencing volatility. If the Euro is volatile, it doesn’t just affect France, but all of the EU. Adding to the confusion of economists, the situation in the rest of the EU is improving. Why is France dragging Europe down? I think this is because France is a charitable country. They prioritized high public spending and generous social benefits over their countries economy. The country’s solution to pay for these programs as revenue growth slowed, was through borrowing, a big mistake.
I see France responding to the situation by increasing taxes. This could increase government income, however, also slow the economy further through decreased investment. Germany, the largest economy in the EU, will be hesitant to give them aid in the light of multiple government collapses; however, they will provide guidance to help stabilize the Euro. The European central bank could also certainly intervene. If the central bank provides liquidity, France will have more cash to lend or invest. Furthermore, if the Central Bank is seen as a lifeline, fear driven selling will significantly decrease.
In international relations, we learned about sovereign nations, such as France and Germany. We learned that sovereign nations often form IGO’s, for example, the European Union. Additionally, we learned countries stabilize through shared civic, or cultural, nationalism. Although EU members retain their cultural identities, they unite through civic nationalism, exemplified by shared commitments and values, such as democracy.
Will France remain the second largest economy in the EU or become the second largest economic catastrophe?