France is engulfed in widespread civil unrest, with riots, looting and historic buildings left smouldering. Yet a more dangerous firestorm is raging through European financial markets as Emmanuel Macron's state faces a catastrophic fiscal reckoning that threatens to plunge the Eurozone into an unprecedented existential crisis.
France's Out-of-Control Spending
The root of the problem lies in France's out-of-control welfare state and an embarrassing lack of economic growth. The country spends an eye-watering sum on state services, with crippling pension commitments eating up immense public resources – such as £20billion out of a £73billion annual education budget spent purely on pensions.
To cover its ballooning deficit and refinance existing obligations, the French government faces raising a staggering £585billion a year.
Markets Recoil
Bond markets have recoiled in horror. French 10-year government bond yields have surged toward 5%, widening the yield gap against German bonds to levels not seen since the height of the sovereign debt crisis. Investors simply do not want French debt without a steep risk premium.
As the Eurozone's second-largest economy, France's tailspin is sending shockwaves across the single-currency bloc. European banks hold trillions in sovereign debt, reviving fears of a return to a financial "doom loop". Worse still, France may soon be forced to beg Brussels for a colossal bailout.
Too Big to Save
While smaller economies could be rescued during previous crises, France's sheer scale means it is perilously close to being too big to save. If Paris demands an emergency lifeline, the EU will face a stark choice: either Brussels agrees to underwrite French debts – forcing a full fiscal union that turns European taxpayers into perpetual guarantors – or it refuses, leaving its economy effectively kaput.
Britain's Shield
For Britain, this is a stark reminder of why we were right to leave the EU. While a French financial collapse would inevitably trigger global market tremors worse than 2008, the UK remains protected by holding its own currency, the pound.
Crucially, British taxpayers are not liable for the EU's colossal mountain of debt. Yet Left-wing politicians continue to argue for dragging Britain back into Brussels' orbit. Hitching our wagon to a sinking, slow-growth EU would be utter madness. As France burns and the euro teeters on the brink, Britain's Brexit freedom is our greatest shield.
