Did Pensions Destroy France?

0:00 France has not been having a great time

0:02 lately.

0:02 [music] It's been almost 2 years

0:04 to the day since we last looked at its

0:05 economy.

0:06 And within that time, what was

0:07 already a country going through some

0:09 dramatic changes has clearly become even

0:11 more turbulent.

0:12 Within just that time

0:13 since our last update, they have been

0:15 through five different prime ministers,

0:16 a clear sign of deep political

0:18 uncertainty.

0:19 Now, there are a variety of

0:21 factors contributing to the minister's

0:22 musical chairs and some fringe issues to

0:24 go beyond purely economics.

0:26 But at the heart of this all is the simple fact

0:28 that the French economy is stuck between

0:30 several rocks and several hard places.

0:32 The economy has not seen sustained

0:33 growth for almost two decades now, which

0:35 by itself is not ideal, but it's also

0:37 not inherently devastating.

0:39 [music] France has historically prided itself on

0:41 its egalitarian culture, strong social

0:43 safety net, robust workers rights, and

0:45 overall very high standard of living.

0:46 Most countries in the world, by

0:48 comparison, would be blessed to freeze

0:49 at this level of prosperity.

0:51 The problem really is that this isn't sustainable

0:54 stagnation.

0:55 Every year, the country

0:56 grows older, putting a larger nominal

0:57 burden on those famously generous

0:59 retirement programs.

1:00 Debt has been creeping up pretty consistently to fill

1:02 in the gap, but that can't go on

1:04 forever.

1:04 The country could tax young

1:06 workers more to fund these problems, but

1:07 they are already struggling with

1:08 consistent brain drain.

1:10 Immigration could fill in those skills gaps, but

1:12 that's become increasingly unpopular,

1:14 not only as a social flash point, but

1:16 also as another economic trend that is

1:17 arguably just kicking the can down the

1:19 road.

1:20 If the country can't tax more,

1:21 can't responsibly take on more debt,

1:23 can't supplement its labor force, and

1:25 can't cut benefits, then it really is

1:27 just destined to flip-flop between

1:28 politicians who promise they have the

1:30 magical cure to an impossible situation.

1:33 Now, all of this is clearly true for

1:34 France.

1:35 But the thing is, it's also not

1:37 unique to France.

1:38 Almost every major developed economy in the world right now

1:41 is dealing with basically the same set

1:43 of unforgiving variables, but France

1:45 seems to be taking it much harder than

1:46 most.

1:47 What makes this even more

1:48 interesting is that comparatively

1:50 speaking, France actually has a lot of

1:52 things going for it over some of their

1:54 peers, like a comparatively strong

1:55 energy base and a diverse foundation of

1:57 resilient industries.

1:59 There is also the

2:00 logical paradox that must be addressed

2:02 that seemingly its aging population is

2:04 the root of all of its problems.

2:06 We are told it just doesn't have enough young

2:08 people to support those who are

2:09 retiring.

2:09 But yet its youth unemployment

2:11 remains stubbornly and shockingly high.

2:13 If France and by extension other

2:15 economies like it really [music] are

2:16 desperate for young workers to pick up

2:17 the slack, why don't they start by

2:19 hiring the ones they already have?

2:21 Well, to get to the bottom of this, we need

2:23 to, as always, answer a few important

2:25 questions.

2:26 What are the economic

2:27 headwinds stalling the French economy?

2:29 Why hasn't it been able to capitalize on

2:31 the benefits it has over other

2:32 economies?

2:33 And finally, is the French

2:34 economic situation really worse than any

2:37 other advanced economy in the world

2:38 right now, or are they just better at

2:40 making their grievances heard?

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3:39 At the heart of the

3:40 problem lies France's aging demographic.

3:42 [music] More than one in five French

3:43 citizens are now over the age of 65,

3:45 roughly 15 million people.

3:47 That is 22% of the population, more than double the

3:50 global average, placing France among the

3:52 world's oldest nations as a nation state

3:54 and a living population.

3:56 And the problem isn't temporary or slowing down.

3:59 By 2070, nearly 30% of the country will be

4:01 aged over 65 years old.

4:03 Complicating the issue is, paradoxically, one of France's

4:06 greatest social achievements, the

4:08 country's high life expectancy of over

4:10 83 years.

4:10 [music] While this is good for

4:12 the individual, it's not so good for

4:13 solving the state's current conundrum.

4:15 The very success of France's social

4:17 safety in preserving the health of its

4:18 citizens has now become a structural

4:20 drag on the nation's economy.

4:22 By 2030, 25% of the population is projected to be

4:25 65 and over, and the old are getting

4:28 older.

4:28 In the notsodistant future,

4:30 France will have as many people [music]

4:31 over the age of 75 as it has over the

4:33 age of 65 today.

4:34 And while only 10 years

4:35 apart, the difference between a

4:37 65-year-old and a 75-year-old can be

4:39 steep.

4:40 One on average is still capable

4:41 of light work, and most can look after

4:42 [music] themselves.

4:43 The same cannot be

4:44 said for most 75year-olds.

4:46 The cold hard statistical reality is that as age

4:48 increases, so does one's economic

4:50 burden.

4:51 The problem is there is no

4:52 immediate solution.

4:53 The seeds of this

4:54 demographic shift were planted decades

4:56 ago and as we all know you simply can't

4:58 turn back the clock.

4:59 Now of course this

5:00 aging demographic problem isn't unique

5:02 to France.

5:03 [music] It's a common trend

5:04 across the developed world.

5:06 What is unique to France is that it has built

5:08 arguably the most comprehensive social

5:09 safety net in the world.

5:10 The LCU.

5:12 While this has created a remarkably

5:13 egalitarian society, it comes with a

5:15 price tag that the country simply cannot

5:17 afford.

5:18 Currently, France's public spending is the highest in the European

5:21 Union, sitting at a staggering 57% of

5:24 GDP, and this is compared to other

5:26 European countries, [music] which

5:27 generally have more government services

5:28 than most already.

5:30 Government spending in the USA, by comparison, accounts for

5:32 only 38% of their GDP, almost a full 20%

5:36 less than France.

5:37 Digging deeper, the weight of the social safety net becomes

5:40 clear.

5:40 Nearly 32% of France's entire GDP

5:43 is [music] exclusively devoted to social

5:44 benefit spending.

5:45 This is a massive

5:46 annual bill that must be paid despite

5:48 France's [music] stagnating economic

5:49 growth.

5:50 So where does the money to pay

5:52 these bills come from?

5:53 In theory, taxes.

5:55 Unlike private pensions or 401ks where

5:58 you save your own money and invest it

5:59 for the future, the French social

6:01 security system is what's known as pay

6:03 as you go.

6:04 Today's workers are paying

6:05 for today's retirees.

6:07 And therein lies the problem.

6:09 This worked great in the

6:10 1960s and 70s when there were nearly

6:12 four workers for every one retiree.

6:14 But as the population continues to age, that

6:16 ratio has collapsed.

6:18 Today, there are approximately 1.9 workers supporting

6:21 every pensioner in France.

6:22 And at current projections, the math only gets

6:24 worse.

6:25 France is at a crossroads and

6:26 must make some difficult decisions to

6:28 address their mounting problem.

6:29 Two seemingly obvious choices present

6:31 themselves.

6:32 Option A, increase taxation

6:34 on the current shrinking workforce, or

6:36 option B, slashing benefits for current

6:37 and future retirees.

6:39 But things are never as simple as they seem,

6:41 particularly in France.

6:43 Let's talk option A.

6:44 Increase taxation.

6:45 Seems like a plausible solution, but there is one

6:48 major problem.

6:49 [music] France is running

6:50 out of room to tax.

6:52 Literally, France has consistently maintained the near

6:54 highest tax to GDP ratio out of the 38

6:57 countries in the OECD at a whopping 44%.

7:00 44 out of every $100 generated in the

7:03 French economy goes straight to the

7:04 government.

7:05 For better or worse, to

7:06 support their massive social security

7:07 system, France maintains one of the most

7:09 aggressive tax systems in the world.

7:11 With a progressive tax system that

7:12 starts at 0% but quickly phases up to

7:15 45% for its highest earners.

7:17 The tax system is a complicated web of income

7:19 taxes combined with employee and

7:20 employer social security contributions.

7:22 The average individual worker in France

7:24 pays roughly 28% [music]

7:26 in taxes.

7:27 But it is actually worse than

7:28 that.

7:29 On average, the total tax burden

7:30 for every single employee in France is

7:32 47% which includes personal income taxes

7:35 and social contribution taxes.

7:37 France's social contribution taxes are share

7:39 between the employee and the employer.

7:41 On average, beyond compensation, the

7:43 employer pays an additional 45% of gross

7:45 salary to the state in social

7:46 contributions.

7:47 This creates some of the

7:48 highest labor costs in the world,

7:49 stifling economic growth and leading

7:51 into our next problem, youth

7:52 unemployment.

7:54 But first, let's talk

7:54 option B, slashing benefits.

7:57 Logically, if France cannot raise [music] taxes on

7:59 the current workforce or corporations,

8:01 the obvious alternative is to slash

8:02 retirement benefits, either through

8:04 reducing benefit payments or raising the

8:06 age of retirement.

8:07 However, that is easier said than done.

8:09 Like most economics, this solution sounds logical

8:11 in theory, but when economic policies

8:13 are applied in the real world, outcomes

8:15 are rarely as theory would suggest.

8:17 The French are particularly protective of

8:19 their hard-earned social safety net.

8:20 To them, it is a hard one, right?

8:22 The culmination of decades of collective

8:24 bargaining and a fundamental contract

8:26 between the citizen and the state.

8:28 Slashing benefits is not a new concept

8:29 to the French and neither is protest.

8:31 In fact, the French are quite fond of it

8:33 and are exceptionally good at it.

8:34 When politicians present plan B, it isn't a

8:37 parliamentary [music] debate.

8:38 It is more akin to a declaration of war that plays

8:40 out in the streets.

8:42 Most recently, in 2023, President Mccron and his

8:44 government proposed pension reform that

8:46 would raise the age of retirement from

8:47 62 to 64 and increase the required years

8:50 of work from 42 to 43.

8:52 Historically, the French have enjoyed one of the youngest

8:54 retirement ages in the world, coupled

8:56 with the fact that their life expectancy

8:58 is among the highest in the EU, and it's

9:00 plain to see that this has been a pretty

9:02 good deal for the French citizenry.

9:03 But not shockingly, 62 is considered high in

9:06 the standards of the French, never mind

9:08 the recently proposed age of 64.

9:10 For much of the 1990s and 2000s, the average

9:13 age of retirement in France was below 60

9:15 years of age.

9:16 This changed in 2010 under

9:17 then President Nicholas Sarcoi.

9:19 Unsurprisingly, the change was not

9:21 welcomed and triggered massive populist

9:22 unrest in the streets of France with

9:24 millions of citizens engaging in

9:25 nationwide strikes and [music] protests.

9:27 Garbage piled up for weeks and across

9:29 the country, one in four fuel stations

9:31 ran dry as protesters blockaded fuel

9:33 depots.

9:33 Despite the violent reaction,

9:35 Sarakazi's government succeeded in

9:36 pushing through the reforms, raising the

9:38 minimum French retirement age to 62.

9:40 All of that is to say that the stage was set

9:42 for Macron's unpopular 2023 reforms, and

9:45 the French reacted well, as expected,

9:48 with mass strikes and angry [music]

9:49 protests.

9:50 Macron first attempted pension

9:51 reform to no avail in 2019, resulting in

9:54 the longest strikes in the nation's

9:55 history.

9:56 But this time, he was

9:57 determined not to fail in spite of

9:58 expected backlash.

10:00 When it became clear

10:00 that Macron and the Bourne government

10:02 would not be able to pass the resolution

10:03 through Parliament, McCron utilized the

10:05 Constitution's controversial article 49.3.

10:08 Article 49.3 was introduced in

10:10 1958 by Charles de Gaul as a last resort

10:12 yet essential tool to remedy the

10:14 failings of the French Fourth Republic.

10:16 A chaotic period of parliamentary divide

10:18 which experienced a staggering 21

10:19 government changes in 12 years.

10:21 It aimed to increase political stability and

10:23 expand government powers.

10:25 a nuclear option to ensure that the state could

10:27 function in spite of an overly fractured

10:28 national assembly unable to reach a

10:30 consensus.

10:31 The article is straightforward in nature but is

10:33 unnervingly undemocratic.

10:35 It allows the prime minister to engage the

10:37 responsibility of the government to pass

10:38 and adopt bills without parliamentary

10:40 reviewing their bill would fail with a

10:42 vote.

10:43 Macron and then Prime Minister

10:44 Elizabeth Bourne invoked the article,

10:46 effectively making their pension reforms

10:48 law and pushing the age requirement to

10:49 64.

10:50 [music] However, once enacted, a

10:52 provision of the article allows for a

10:53 vote of no confidence.

10:55 Too quickly followed and failed.

10:57 Parliament's hands were tied.

10:59 The French people, though,

11:00 would not accept the change so quietly.

11:02 Poll suggests that nearly 80% of the

11:04 population found the use of article 49.3

11:07 as unjustified.

11:08 As if on schedule, the

11:09 French took to the streets in protest,

11:11 eager for their voice to be heard.

11:13 Once again, strikes ensued, vital industries

11:15 shut down, and trash piled up.

11:17 Macron's popularity followed suit, reaching one

11:19 of the lowest approval ratings in modern

11:21 French history.

11:22 Now, as economists, we

11:23 like to pretend we are generally above

11:25 politics.

11:26 But the reality is that even

11:27 the best economic ideas need some

11:29 administrative weight behind them if

11:31 they are going to be implemented.

11:32 As something of a common theme to be aware

11:34 of, France has suffered from the need to

11:36 make big policy changes, often without

11:37 the political will to actually make

11:39 them.

11:40 Nonetheless, Macron had delivered

11:41 on his policy and his pension reforms

11:43 were now law.

11:44 Inevitably, life carries on.

11:45 The protests gradually faded and the

11:47 French returned to work.

11:49 But while Macron had seemingly won the battle, he

11:52 would soon find out that the war was far

11:54 from over.

11:55 Fast forward to 2025 and

11:56 Macron's pension reforms are once again

11:58 the topic of debate.

12:00 But this time, the

12:00 momentum has shifted.

12:02 In 2024, Macron's prime minister, Michelle Baret,

12:05 attempted to use the same tool as Macron

12:06 and Bourne had in 2023 to pass a social

12:09 security budget which included tax

12:10 increases and spending cuts in an effort

12:12 to reign in France's spiraling deficit.

12:15 As always, the use of the article

12:16 provides for a vote of no confidence,

12:18 and this time it passed.

12:19 Succeeded for the first time since 1962.

12:22 Prime Minister Michael Barier's government had

12:24 officially collapsed.

12:25 Barier did manage to succeed in one monumental regard,

12:28 though, becoming the shortest serving

12:29 prime minister in the history of the

12:31 French Fifth Republic, lasting only 90

12:33 days.

12:34 He was replaced by Fransis Biru,

12:36 who after battling a deadlock parliament

12:37 for 9 months, made the bold decision to

12:39 call for a self-imposed vote of

12:40 confidence in an attempt [music] to push

12:42 forward his austere budget.

12:43 It backfired.

12:44 He was ousted and in doing so

12:46 became the first French prime minister

12:48 in modern history to accomplish such a

12:49 feat.

12:50 France would be getting its fifth

12:51 prime minister in less than 2 years.

12:53 Next up, Prime Minister Sebastian Lornu,

12:56 who in refusing to be outdone by his

12:57 predecessors, resigned in less than a

12:59 month.

13:00 But he was appointed once again

13:01 the following day.

13:03 The political turmoil of the fourth French Republic that

13:05 Charles de Gaul had hoped would remain

13:06 firmly in the past is back again with no

13:09 signs of letting up.

13:10 Back to today, and

13:11 the war is not over.

13:12 Quite the [music] opposite actually.

13:14 Mcron's hard-fought reforms are more in jeopardy than ever

13:16 before.

13:17 Entering 2026, Prime Minister

13:19 Lornu once again found himself in the

13:21 all too familiar impossible [music]

13:22 bind.

13:23 To avoid yet another government

13:24 collapse, he suspended Macron's pension

13:26 reforms.

13:26 For now, the retirement age

13:28 remained 62.

13:29 And with it, hopes of

13:30 deficit reforms are gone, at least until

13:32 2028, conveniently after the next

13:34 election.

13:35 The government has successfully avoided another no

13:37 confidence vote, but at a massive fiscal

13:39 cost.

13:39 Economists warn the delay will add

13:41 billions to the deficit.

13:42 Macron's approval rating has dropped to historic

13:44 lows, and the people in parliament are

13:46 eager for change.

13:47 The next president will be handed the same demographic time

13:49 bomb with predictably little appetite

13:51 for structural change.

13:52 The proverbial can has once again successfully been

13:54 kicked.

13:55 The French people refuse to

13:56 accept the future, and the French

13:58 politicians find safety in the present.

14:00 While convenient, the situation is

14:02 untenable.

14:03 Now, at the other end of the

14:04 spectrum of France's aging retirees are

14:06 its youth.

14:07 Remember the high labor costs

14:08 we mentioned earlier?

14:10 Well, this is where it shows up.

14:12 [music] France is desperate for workers to fund its

14:14 retirees.

14:15 Yet, it has one of the highest

14:16 youth unemployment rates in the

14:17 developed world.

14:18 One important aspect of

14:19 France's egalitarian culture is its

14:21 robust protection of workers rights.

14:23 The French worker is typically well

14:25 protected from discrimination, wrongful

14:27 termination, and from being overworked.

14:29 The standard work week in France is 35

14:31 hours, and employees are afforded the

14:32 right to disconnect, promoting healthy

14:34 work life balance.

14:35 French employee employer agreements typically fall into

14:37 two categories.

14:38 The CDI or contraure and

14:40 determinine and the CDD contraurine

14:44 otherwise known as permanent and

14:45 temporary contracts.

14:47 The CDI is the

14:48 standard open-ended permanent employment

14:49 contract which offers maximum job

14:51 security, paid benefits and stability.

14:53 [music] In France, this is the default.

14:55 In fact, employers must justify their

14:57 use of a CDD or fixedterm contract.

15:00 CDDs are typically used for seasonal

15:02 employment, replacement of absent

15:03 employees, or to fill temporary work for

15:05 a specified task, and typically range

15:07 from 1 to 18 months.

15:08 In essence, if you

15:09 have a CDI permanent job contract, you

15:11 have [music] the gold standard of

15:12 benefits and are almost impossible to

15:14 fire.

15:14 As an employee, this sounds great.

15:17 As an employer, not so much.

15:19 The CDI has created unintended consequences for the

15:21 French economy that are particularly

15:22 acute in the current crisis.

15:24 Remember, on top of salary, employers must pay the

15:27 government an additional 45% of gross

15:29 wages in social contributions.

15:30 The cost of hiring an employee in France is akin

15:33 to hiring 1.5 elsewhere.

15:34 For comparison, employer social security taxes in the

15:37 United States are 6.2%.

15:39 So, hiring new employees is too costly,

15:41 [music] and getting rid of bad ones is

15:43 near impossible.

15:44 As a result, businesses

15:45 have clammed up.

15:46 This has created a

15:47 two-tiered system in France.

15:49 Those with permanent positions and those without.

15:51 On one side, you have an older skilled

15:53 workforce secure in their employment,

15:54 and on the other, you have the youth.

15:56 Young people in France with little to no

15:58 qualifications are being hired into

15:59 temporary roles and receiving little to

16:01 no training.

16:02 The contract ends, and

16:03 workers are left unemployed, no closer

16:05 to securing [music] permanent employment

16:06 than when they started.

16:07 They are ever increasingly being trapped in a

16:09 self-reinforcing cycle of temporary

16:11 work.

16:11 The problem is only getting worse.

16:13 CDIs, or permanent roles, account for

16:15 approximately 85% of total employment

16:17 [music] in France.

16:18 The other 15% fall

16:19 into the temporary category.

16:20 But an alarming trend is emerging.

16:22 Permanent positions well by nature remain

16:25 permanent with less turnover and less

16:27 hiring.

16:28 Temporary employment, however, has been undergoing a structural shift.

16:31 Over the last two decades, the share of

16:33 new hires falling [music] into the

16:34 category of fixedterm contracts lasting

16:36 less than 1 month in length has

16:38 increased from slightly under 50% to

16:39 nearly 70.

16:40 And in France, the odds of

16:41 transitioning from a temporary contract

16:43 to a permanent position is extremely

16:45 low, somewhere between 10 and 20%.

16:47 [music] The same laws that are meant to protect

16:49 workers in France are preventing them

16:51 from being hired into meaningful

16:52 employment.

16:53 One solution for a labor

16:54 shortage seems obvious.

16:56 Immigration.

16:57 The problem is many of those eager to

16:59 immigrate are unskilled workers, falling

17:01 into the same trap as France's forgotten

17:03 youth.

17:03 The results of this rigid

17:05 two-tiered system of insiders and

17:06 outsiders is a forgotten generation of

17:08 young people that feel like guests in

17:10 their nation's economy.

17:11 Yet, they are being asked and relied upon to pay for

17:14 the benefits of a system in which they

17:15 may never participate in.

17:17 High costs of labor are locking the unskilled out of

17:19 the workforce.

17:20 And on the other end of

17:20 the spectrum, we have the country's

17:22 highly educated and highly skilled.

17:24 Well, they are not locked out.

17:26 In fact, they are in high demand.

17:28 Yet, they are not participating.

17:29 They are fleeing.

17:31 This is the French brain drain.

17:32 Every year, thousands of French engineers,

17:34 doctors, and business graduates move to

17:36 Switzerland, Britain, and the United

17:37 States in search of less taxes and more

17:40 money.

17:40 When your economic growth is

17:41 stagnating, having your most productive

17:43 citizens flee to greener pastures is not

17:45 what you want.

17:46 A shrinking skilled workforce, no room to raise taxes, and

17:49 no appetite for cutting benefits has

17:50 left France with only one solution.

17:52 France has been forced to rely on debt

17:54 to make the math work.

17:56 For a long time,

17:56 this seemed like the easy way out, but

17:58 the bills are due, and the proverbial

17:59 bank may be closing.

18:01 How did they manage

18:02 to get here?

18:03 Well, quite frankly, pun

18:04 intended, it was initially out of

18:05 necessity.

18:06 France's spiral into debt

18:07 began in the aftermath of 2008 when the

18:09 collapse of the US housing market

18:11 triggered a financial crisis that

18:12 spilled beyond its borders and into

18:14 overexposed French and European banks.

18:16 Despite the policies of austerity by its

18:18 European neighbors, France borrowed from

18:19 the playbook of the United States,

18:21 leaning into a debtfueled stimulus plan

18:23 to support recovery.

18:24 It seemingly worked.

18:26 But instead of tightening its

18:26 belt post crisis like many other

18:28 European countries, France developed a

18:30 taste for borrowing drawn in by a decade

18:32 of near zero interest rates.

18:34 After all, the money was basically free until it

18:37 wasn't.

18:37 Cue the CO9 pandemic.

18:39 In order to avoid the economic and social

18:41 catastrophe of the lockdown, France once

18:43 again turned to the free money printing

18:44 presses in a massive whatever it takes

18:46 response to the pandemic.

18:48 France's debt to GDP had reached an unprecedented

18:50 115%, nearly doubling since those good

18:53 old days before 2008, and it has only

18:55 gone up since.

18:57 But as we all know all

18:58 too well today, one of the unfortunate

19:00 side effects of massive stimulus

19:01 spending is inflation.

19:03 And like most of

19:04 the world, France was not spared.

19:06 France's free money party was officially

19:07 over.

19:08 But it was too late.

19:09 As the ECB raised rates to combat inflation, the

19:11 cost of refinancing the debt has

19:13 skyrocketed.

19:14 Today, France is spending

19:15 as much on interest payments as it is on

19:17 defense.

19:17 And the problem is compounding.

19:19 Ideally, a country can grow its way out

19:21 of debt.

19:22 But France's economic growth is

19:23 stagnating, not increasing.

19:25 The country's primary money makers, luxury

19:27 goods and tourism, are both facing

19:28 headwinds and are unable to fuel the

19:30 growth France is in desperate need of.

19:32 That leaves the world to wonder, is

19:34 [music] France on a fast track to become

19:36 the next Greece?

19:37 While France hasn't quite reached the debt to GDP ratios of

19:40 the Greek crisis, they are closing in.

19:42 In fact, French bond yields have

19:43 surpassed those of Greece.

19:45 Yikes.

19:46 This is more than a psychological blow.

19:48 It is a signal that investors are fleeing.

19:50 But this time, it isn't a periphery country

19:52 in the Euro zone.

19:54 This time, it is the

19:55 second largest economy on the continent.

19:57 A Greekstyle crisis in France would

19:58 prove catastrophic.

20:00 France isn't alone in its debt problems or its demographic

20:02 problems.

20:03 Many of the major economies of

20:04 the developed world share similar woes.

20:06 Look at the United States.

20:07 They have a higher debt to GDP ratio and a larger

20:10 deficit spending.

20:11 What then is so

20:12 different?

20:13 Well, a few things.

20:14 For one, the US economy is growing faster and has

20:17 been while France is stagnating.

20:19 Secondly, and more significantly, the

20:21 United States has the privilege of being

20:22 the world's reserve currency and with it

20:24 the ability to almost endlessly borrow

20:26 debt and attract investment.

20:28 unless they were to do something crazy to mess that

20:30 up [music] hypothetically.

20:32 France, on the other hand, belongs to the Euro zone

20:34 and is beholden to the Stability and

20:36 Growth Pact, which in theory mandates a

20:38 debt to be below 60% of GDP and a 3%

20:41 deficit limit.

20:42 France is well beyond

20:43 those limits and has caught the eye of

20:44 Brussels.

20:45 The EU has enacted its

20:46 excessive deficit procedure mandating

20:48 that the country end its excessive

20:50 deficit by 2029 or face penalties

20:52 including fines and sanctions.

20:54 The problem is meeting these requirements

20:55 means pivoting to austerity.

20:57 And as we've already discussed, the French

20:59 citizens are not fans of austerity, and

21:01 the politicians have no appetite for it.

21:03 The only way out seems to be growth.

21:05 While the world is race full speed into

21:07 the AI revolution, it faces a major

21:09 hurdle, a lack of energy to power its

21:11 massive data centers.

21:12 Fortunately for France, it has the largest nuclear

21:15 energy base in Europe.

21:16 It is uniquely positioned to power the innovation of

21:18 tomorrow.

21:19 But unfortunately for France,

21:21 that requires tens of billions in

21:22 investment.

21:23 And well, they simply do not

21:25 have the money nor the borrowing

21:26 capacity to take advantage.

21:28 They are stuck between a rock and a hard place.

21:31 What small growth the economy has is

21:32 fueled by government spending that it

21:34 cannot afford.

21:35 And the time for

21:35 borrowing may be running out.

21:37 They are staring at a wall of EU imposed

21:39 austerity if they cannot get their

21:40 fiscal house in order.

21:42 But to do so

21:42 risks civil unrest or taxation that

21:44 slows down growth.

21:45 France finds itself in a complex situation with no easy

21:48 solutions.

21:49 But something or someone's

21:51 got to give.

21:52 Will it be the workers, the

21:53 retirees, the politicians, or the

21:55 nation's economy?

21:56 Now, if you want to

21:57 see France's predicament in the context

21:59 of Europe's wider struggles at the

22:00 moment, we have actually put together an

22:02 overview of its major economies,

22:03 including France, which you should be

22:05 able to click to on your screen now.

22:07 Thanks for watching, mate.

22:08 Bye.