As someone who has always opposed austerity, I find France’s situation puzzling. The country has a national debt of 114% of GDP and a budget deficit of 5.8%, yet despite years of accusations from both left and far-right critics that President Macron has pursued “ultra-neoliberal” policies, the numbers tell a different story. On a macroeconomic level, France’s government spending (57.3% of GDP) and tax revenue (51.4% of GDP) are among the highest in the world, including social spending that exceeds that of any European neighbor.
At the same time, anyone who has spent the past decade in France has likely heard widespread complaints about declining public services. Doctors and nurses point to staffing shortages in public hospitals; rural residents protest the closure of train lines; students and academics decry underfunded universities and research institutions, many struggling with outdated infrastructure.
Some of these issues aren’t purely financial. Nearly every country faces a shortage of healthcare workers—a problem in France that was made worse by caps on medical school admissions, which were only lifted in 2020. Over the last 25 years, urbanization has increased from 76% to 82%, making it more expensive per person to maintain services in shrinking rural areas. This raises difficult questions about fairness and resource allocation. The French themselves are increasingly aware of the downsides of centralized decision-making in Paris and broadly support greater decentralization.
Still, in a country that spends more of its budget on these areas than almost any other, there never seems to be enough money. Unlike their Nordic counterparts, most people in France are, to some degree, dissatisfied. Meanwhile, debt and deficits continue to climb to unsustainable levels. So what’s really going on?
The far right blames immigration, pushing a false narrative that asylum seekers are straining public services. The centrist Prime Minister, François Bayrou, proposes trimming spending across the board to save €44 billion a year—even suggesting the politically toxic idea of eliminating two public holidays. The left, more reasonably, calls for wealth taxes, though their proposals could also affect those earning over €20,584 a year and show little sympathy for the administrative burden on self-employed workers and small businesses.
Amid this disagreement—which could bring down the government when Bayrou faces a confidence vote on September 8—almost no one is talking honestly about the single biggest item in France’s discretionary spending: the €211 billion spent each year to subsidize businesses to create jobs. France’s labor market is notoriously rigid, with notice periods that can last two to three months. This has led to persistently high unemployment, stagnant wages, and a system that spends more on business subsidies than on education.
What if France adopted a Danish-style “flexicurity” model instead? How much of that €211 billion could then be redirected toward reducing the deficit and investing in health, education, and green energy infrastructure?Let me be clear before I’m misunderstood. Not every euro spent in this way deserves criticism: France’s model of strong state involvement in the economy is far from misguided. It’s one reason why, despite its challenges, France still has what might be Europe’s only truly comprehensive economy—spanning everything from agriculture to artificial intelligence. In fact, this approach is becoming more relevant by the day. China has always operated this way, and the U.S. is increasingly doing the same.
Capitalism needs guidance. To give just one example, without direction, we end up with a chaotic situation where regions compete to attract data centers by lowering standards—centers that end up powered by new gas turbines and strain local water supplies. Instead, regulation and incentives could steer investment to places like Iceland, where abundant geothermal energy could power them sustainably, and benefits could be shared fairly.
In the past, some of this direction came from international agreements and treaties, which helped smaller countries stay agile and innovative. But today, we live in a world where only nations—or groups of nations—large enough can protect their external interests while fostering dynamism at home. France’s challenge is one of size. Like other European countries, it’s too small to build those protective barriers on its own—that role must fall to the EU. At least, it should, if European leaders finally accept that the old global order isn’t returning.
The EU, in its current form, can’t thrive in a world driven by power rather than rules—a world where the U.S. and China blend geopolitics and economics seamlessly and leverage their influence across domains. But the EU can succeed if it adopts a classically French approach. It’s not just that France needs a wealth tax—the EU needs one too. It’s not just that the French space agency requires more funding—so does the European Space Agency. It’s not just that France should invest more in green energy—the entire EU needs energy independence through renewables.
The irony is that Europe won’t move in this direction unless France is strong enough to lead the way. For that to happen, France needs a thriving economy and a political class willing to engage in honest, long-term planning—not scapegoating, gimmicks, or business as usual.
Alexander Hurst is a Guardian Europe columnist.
Frequently Asked Questions
Of course Here is a list of FAQs about Frances debt and business subsidies framed in a natural tone with clear concise answers
BeginnerLevel Questions
1 What is a national debt crisis
A national debt crisis is when a country owes so much money that it struggles to pay it back This can scare off lenders force the country to pay higher interest rates and lead to severe cuts in public spending
2 What does subsidizing businesses mean
It means the government gives money tax breaks or other financial support to companies The goal is to help them grow create jobs or compete internationally
3 If France has so much debt why is it giving money to companies Isnt that making the problem worse
This is the core of the debate The government argues that this spending is an investment They believe supporting companies now will lead to a stronger economy more jobs and higher tax revenues in the future which will ultimately help pay down the debt
4 Can you give a simple example of a French business subsidy
A common example is a tax credit A company that invests in research and development gets a reduction on the taxes it owes to the government effectively saving it millions of euros
IntermediateLevel Questions
5 What are the main benefits of these subsidies
Job Creation Retention Prevents companies from moving factories and jobs to other countries
Promoting Innovation Encourages companies to invest in green technology AI and other highvalue sectors
Economic Competitiveness Helps French companies compete against rivals from countries like the US and China that also receive heavy state support
6 What are the common criticisms or problems with this approach
Inefficiency Critics argue the money doesnt always go to the most productive companies but to those with the best political connections
Corporate Welfare Its seen as giving handouts to profitable large corporations that dont truly need them
Adding to Debt In the short term it directly increases government spending and adds to the national debt
7 Are these subsidies only for big corporations
No but large corporations often receive the largest sums France also has many programs for small and mediumsized enterprises and startups to help them get off the ground
