FRANCE Collapsing

France has just set a new world record. Its new Prime Minister quit 14 hours after naming his new cabinet. That is Prime Minister number 7 that served under Emmanuel Macron. The financial markets are now in chaos with France's 10-year bond yields having jumped to record levels and France's debt pile now represents 115% of GDP and its deficit is almost double the European Union limits. So things are going very badly in France right now and in this video we're going to take a look at how it got into this situation and what's likely to happen over the next three to six months. Hi, welcome back to the channel. As you've just heard France is in a dire situation right now. Its latest Prime Minister has resigned less than one day after forming his new cabinet and this is actually the 7th Prime Minister that served under Emmanuel Macron and the reason why France is in such a shambolic state at the moment is because it's got this weird two-level parliamentary system whereby it has a President and a Parliament that are separate. You can see from this chart that Emmanuel Macron is the current President. He's actually been in charge since 2017 so he's been there for a long time. He's probably the person that you think about when you think about the leader of France but actually he isn't in charge of that much. He's in charge of foreign policy and overseas relations and dealing with the European Union but actually the person who's in charge of all of the policy setting and getting things approved for the French budget is the Prime Minister and Emmanuel Macron appoints the Prime Minister and the Prime Minister is part of the Parliament, the National Assembly and there are 577 seats in the National Assembly and the problem that's going on in France right now is that Emmanuel Macron's party only has around 168 seats so it's actually got a minority position. Emmanuel Macron can't influence any of the votes that are going through Parliament. He needs other parties to be supporting his Prime Minister and unfortunately that isn't happening particularly since 2024. If you have a look at this list you can see the seven Prime Ministers that have served under Emmanuel Macron and what this shows is that between 2017 and 2024 there were three different Prime Ministers and that's relatively normal for France. However since 2024 we have seen four Prime Ministers come and go and the reason for that was that there was an election in June and July of 2024 and that was when the Parliament was really split into all of these different voting parties so those four Prime Ministers when they present a budget to Parliament it has to be approved so to go and agree all the spending on everything they need everybody to sign off on it. Well they certainly need a majority and those four Prime Ministers have basically failed to be able to get anybody to agree to anything. So you can see that the previous two Prime Ministers Michel Barnier and Francois Beyroux both left after a no confidence vote so they put forward a budget saying what they wanted France to do in terms of all its spending and they were told by the rest of the Parliament that they weren't going to support it. They then held a no confidence vote and voted them out so they were basically kicked out of the job and then the latest PM basically started his Parliament and he knew that nobody was going to support any of his policies so he was going to go down exactly the same road of a no confidence vote he decided not to hang around for that life's too short so he fell on his sword and resigned. So where does this leave Emmanuel Macron and France? Well basically it's in limbo everything is frozen because if they can't get a new budget approved by Parliament then they have to work with last year's budget everything is frozen at those levels so you can't instigate any new spending plans you can't instigate any new tax regimes so basically you're just stuck with where you were and obviously for a country like France where the debt is growing it's spending more than it's earning it can't afford to just carry on as normal because things are going seriously off track. If we have a look at this chart it shows the development of France's debt over the past five years and you can see that we have got a continued upward trend here and the current level of debt of 3.4 trillion euros actually represents around 115 percent of GDP so its debt is now higher than its GDP and the problem that France is facing is that the political turmoil and all of the uncertainty is now affecting its rating and Fitch recently downgraded France's credit rating to A plus and what that means is that it increases the cost of your debt if your debt is seen to be higher risk then people want to be paid a higher reward for taking that debt on and this chart shows what's been happening with the 30-year bond yield in France over the past 10 years and you can see that it's now up above 4.4 percent which is the highest by far that it's been at any time in the last 10 years and if you look at where the bonds were actually being placed around 2020, 21 and 22 around the Covid period you can see that the yield on those bonds was actually less than one percent it was down at around half a percent for a lot of the time so when those bonds come up for maturity if you're having to issue new bonds to repay the old bonds at 4.4 percent that represents a huge increase over eight times from those levels but at any point in the last 30 years France was issuing debt at less than 4.4 so all the new debt is going to cost more if we have a look at the 10-year yield you can see it's up to 3.5 percent which is significantly higher than all of the bonds that were issued in 2015, 2016, 17, 18, 19 so as and when all of those bonds need to be repaid the cost increase is going to be absolutely huge so this is a major problem for France and that's one of the reasons why it needs to increase taxes to try to get the balance back on its spending because its current deficit is running at around six percent which is almost double the EU's limit of three percent so France as the major player one of the biggest players in the European Union is actually the worst offender in terms of breaching those limits and if we have a look at how France's debt to GDP ratio compares to the rest of the G20 you can see that there are only four countries that have a higher ratio Japan where it's 237 percent that is off the scale Japan is in serious difficulty with regards to the amount of debt that it's taken on compared to its GDP the next highest is Singapore where it's 173 percent which is also very high the highest in the European Union is Italy with 135 percent and then we've got the United States at 124 percent coming in at number four so France at 113 is number five in terms of the worst offenders in the G20 the only other two countries with a ratio above 100 percent are Canada where it's 111 percent and Spain where it's 102 now all of these figures are benchmarked against the official 12 month GDP for December 24 so we don't have rolling quarterly updates but if we did then all of these ratios would be higher and I think the UK would be knocking firmly on the door of being above 100 percent if it was working on a 12 month rolling basis and interestingly if we have a look down the bottom of this chart you can see that the countries the two countries with the lowest debt to GDP ratio are Turkey where it's just under 25 percent and one of the reasons for that is that Turkey I think hasn't historically taken a lot of debt and it would struggle to raise a lot of debt and it would be very expensive because of what's going on in the economy and then we've got Russia interestingly right at the bottom with 16 percent and Russia hasn't raised a lot of debt in the past and I think it would struggle to right now so what's the summary and conclusion today well I wanted to post this video because I recently made a video on France talking about the crisis that was going on following the resignation of the previous prime minister I wasn't expecting to make another video so soon thereafter because I expected the new prime minister to stay in his job for at least a few months he was appointed around 27 days ago but he actually only lasted for 14 hours once parliament had been reconvened because he was told in no uncertain terms that there was no way that anybody was going to vote for his policies and rather than hanging around and wasting time and putting together a budget and then having it voted down and then getting a no confidence vote against him he decided to just walk out of the door and not waste anybody's time least of all his own but this represents a serious problem for Emmanuel Macron because he's been the leader of France since 2017 he's probably the person that you think of when you think of who's in charge in France so notionally he is the president so he is in charge of some things and certainly he goes to all of the big meetings you may have seen recently he met with Donald Trump and they were talking about Ukraine all those sorts of things so he is the front man the spokesman for France however the prime minister is in charge of all of the nuts and bolts and getting everything agreed and signed off by parliament and the serious problem that France is facing at the moment is that they don't have a majority in fact Emmanuel Macron's party has a significant minority so they can't agree anything on their own they have to persuade other parties to join them and vote things through and unfortunately they're not able to do that that's the serious issue that France is facing right now and Emmanuel Macron tried to fix this issue back in 2024 when an election was held for the national assembly but unfortunately the divisions actually were greater than they were previously so the problem actually magnified following that election and that's why we've seen a succession of prime ministers come and go because nobody can agree anything so where does France go from here what does it do well as we've seen the debt pile is rising the debt costs are rising France is running a deficit so it's spending more than it's earning so all of that is a nightmare so France really needs to instigate a an austerity budget where it cuts its spending and also maybe increases its taxes but those sort of policies are generally very unpopular with people who are voting so not many people in France are going to vote for a party that's saying we're going to increase your taxes and cut public spending nobody really wants that so I think if a new election was called next week we'd probably see similar divisions to what we've seen in the previous election so France is in a real mess right now it needs to have two or three of these parties come together and agree policies that they're happy to push through but unfortunately a lot of those parties are not supportive of Emmanuel Macron so we've got a situation where we've got a president who's head of the country and a whole lot of politicians that are not supporting the president they want to see some change so is Emmanuel Macron realistically going to resign is he going to give up his presidency to try to get this situation resolved well as it stands at the moment that doesn't look likely it doesn't look like he's thinking about leaving his job but even if he did would that fix it would we see the parties in France coming together and agreeing some sort of middle ground where they could get everything approved well that remains to be seen but the situation right now is quite critical because France is overspending it's got a lot of debt that debt is becoming more and more expensive it's seeing its credit rating being downgraded and it can't get anything agreed through parliament so if it doesn't change that situation it's going to have to just exist on its previous year's budget everything will start to stagnate as GDP is slowing down debt is going up and we're going to see potentially a massive recession coming in France if it doesn't get control of the current situation this could be a real disaster over the next three to six to 12 months in France and this is all being caused by political divisions and the inability to actually approve spending plans and get things done so this is a major problem for the second biggest economy in the European Union after Germany and in fact France is the biggest country geographically in the EU it's the biggest land mass got a population of around 68 million and unfortunately that population can't agree on what they want to do they can't put politicians into the jobs where they need to actually agree things and get them signed off and so this mess is likely to continue for the rest of 2025 and until a new election or a new policy is sorted out then France looks like it's seriously in big trouble so hopefully you've enjoyed today's video found it useful informative and thought-provoking if you've liked what i've said then please give me a thumbs up and subscribe if you haven't done so already really appreciate 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