Government Seeks Cuts, Protesters Demand More: France's Dilemma Over 5,400 Trillion Won in Debt

Let us talk about the turbulent protests currently unfolding in France. Demonstrations across France are now being broadcast live around the world. Scenes of looting have also been shocking. Yet, looking at the situation, it does not seem easy for the French government to resolve this issue.

Allow me to explain with financial figures why this problem is so difficult for the French government to solve. While there are various economic indicators, let us look simply at the French government's revenue and spending. Next year, French government revenue is projected at 375.7 billion euros, or approximately 563.55 trillion won in Korean currency. Nearly all of it comes from tax receipts. Then what about money going out—government expenditure? It stands at around 548.9 billion euros, or roughly 823.35 trillion won. The deficit already projected for next year is nearly 156.4 billion euros, approaching 235 trillion won. That shortfall must be entirely covered by issuing government bonds or other means, which all turns into national debt. France already has far too much debt. It amounts to 5,400 trillion won, approaching 120% of GDP. Because it is so massive, rumors of a fiscal crisis are even circulating. On top of that, an increase of over 200 trillion won in additional debt is already scheduled for next year. France faces a situation where it must pay more than 100 trillion won in interest alone each year.

If things continue at this rate, a sovereign default could even occur, so the French government is attempting to address it somehow. There are only two options: either increase revenue or cut spending. However, the tax burden ratio in France—for both corporations and individuals—is already among the very highest. It ranks among the top three countries in the OECD. France also lacks corporate giants like Samsung Electronics or SK Hynix that can suddenly reap massive profits and fill up the national tax coffers. That is why the government is attempting to cut spending. Although this target is already fraying before the budget is finalized, the government is seeking to cut around 37 trillion won from next year's projected budget. That is the current financial predicament of the French government.

Yet nearly all the demands from the students and labor organizations currently protesting would require spending even more money. Looking directly at the demands of the students who triggered this wave of protests, they are calling for 15 trillion won to be invested in upgrading school facilities and hiring additional teachers. When scholarships and living expense subsidies are factored in, the price tag balloons by trillions of won more. While the government announced last Monday that it would invest 1.5 trillion won annually into upgrading school facilities, that falls far short of the scale demanded by students.

[Shannon Ongmilan / Student Organization Spokesperson: "If they do not respond to our demands, we will take to the streets again, and high school blockades will resume."]

The government claimed it would cut 37 trillion won to rein in national debt, but merely accepting the students' demands would already represent a major setback to next year's goals. On top of that, the demands from labor unions all call for increases: raises in civil service salaries, higher minimum wages, bigger pensions, enhanced social benefits, and more. Looking at civil service salaries alone, the proportion of civil servants in France is twice as high as that of South Korea. That means public spending is correspondingly substantial. If the government were to accept the 10% pay raise demanded by unions, an additional 35 trillion won would be required. Thus, resolving the issue requires spending money, but because the French government lacks that money, finding a resolution is extraordinarily difficult. Many warn that rather than paying off or reducing this mountain of debt, such measures would only make it grow even larger.

However, the students and workers taking to the streets hold a completely different view. They argue that rather than cutting expenditure, the government should raise revenue. They insist that ample revenue can be extracted from large corporations and the wealthy. There is a proposal known as the "Zucman Tax," designed by Professor Gabriel Zucman, which is a type of wealth tax. It proposes levying an additional 2% tax each year on individuals with net assets exceeding 100 million euros, or approximately 150 billion won. Proponents claim this would bring in an extra 200 trillion won annually. While that 200 trillion won figure may be somewhat inflated, comprehensive research studies suggest it could yield around 40 trillion won. In any case, it could at least cover the spending reduction targets the government seeks, so protesters argue that is where the funds should be collected. Furthermore, since President Emmanuel Macron previously lowered corporate taxes to support businesses, they argue those taxes should now be reinstated. From the standpoint of students and workers, there are plenty of avenues to boost government revenue. Yet the wealthy are hardly likely to accept such a wealth tax quietly, and businesses, already burdened by heavy taxes, are eager to avoid carrying any additional weight.

Looking at the French automotive sector alone, more than 30% of jobs have disappeared since 2010. Much of that is due to factories relocating overseas. Seeking a revenue source that avoids burdening domestic companies while generating new tax income, the government turned to major U.S. platform companies that generate hefty revenues in France while creating few local jobs. Prominent global giants such as Apple, Google, Meta, and Amazon have each been hit with fines running into hundreds of billions of won. However, because these penalties are tied up in litigation, it remains uncertain how much revenue will ultimately be collected. Furthermore, the U.S. government will hardly stand by idly. Things will not simply unfold as the French government wishes.

France spends more than it earns. Its debt is substantially higher. While the government attempts to reduce that debt by slashing expenditure, the public is protesting and demanding that spending be increased. Instead, protesters insist revenue should be raised by taxing the wealthy and corporations. Thus, the two sides remain locked in a tense standoff.

This is precisely where politics is needed. In times like these, politics ought to foster social dialogue and compromise. Unfortunately, the French government lacks that political capital. Macron's approval rating currently hovers around 15%. Even when ratings are at 30%, administrations struggle to command authority; with a 15% approval rating, how much political leverage can one exercise? Moreover, a presidential election is scheduled for next April. Currently, the top two contenders in public opinion polls represent the far right and far left extremes. Macron's words carry little weight. Under these circumstances, protesting groups find it impossible to trust whatever promises the current administration makes. Once a few months pass and a new president and government take office, they could easily dismiss those commitments with, "We have nothing to do with promises made back then." These are all the factors surrounding the protests currently taking place in France. Looking at the full picture, one cannot avoid the conclusion that France currently possesses little capacity to resolve this turmoil.

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