France faces a ‘doom loop’ as it spirals downwards

October 21, 2026 — 4:30pm

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When protests over high petrol prices ripped through France in 2018, President Emmanuel Macron offered to enact about $US11 billion ($15.7 billion) in tax cuts and wage increases to try to quell the unrest.

Today, after protests over education turned violent, Macron is in no position to use money to bring calm to the streets.

That’s because the French government is also fighting the prospect of a crisis in its bond market. Investors have been dumping French debt, unsure of the government’s ability to manage its budget amid high interest rates and political uncertainty.

Announcing a big financial commitment to mollify protesters would likely rattle investors further and lead to another jump in the government’s borrowing costs. Macron, approaching the end of his time in office, is leading a centrist government without a governing majority. He is left in a tight spot: both inaction and more spending could exacerbate France’s troubles and give populist politicians running for his seat next year a bigger opening to attract aggravated voters.

France is not the only country facing a debt trap. As borrowing grows in many wealthy nations, populist political parties are surging. Experts warn the mix could combust into an economic crisis.

France sends in troops as Paris simmers in aftermath of riots

Governments face a “doom loop”, in which market turmoil and political tumult feed off each other, according to Michal Brzozowski and Joanna Siwinska-Gorzelak, researchers at Poland’s University of Warsaw, who published a research paper on the relationship between populism and fiscal policy.

“The risk is less about a sudden debt default and more about a slow-motion economic drag,” they wrote in an email.

At the root of the problem is a considerable tension: amid deep political and fiscal uncertainty, voters and investors appear to want different........

© WA Today