It's difficult to tune in to the news at the moment without being presented with a story on some form of societal unrest across Europe. The violent protests in France have attracted much of the attention, but even in the 72 hours or so since I started drafting this article, we've seen demonstrations in Italy, Spain and Albania, albeit over slightly different grievances with varying levels of unrest. As these events continue, so do the questions about what's driving them.
Recently, in a WhatsApp chat with friends, the topic of France came up. What may on the face of it seem relatively straightforward from a root cause perspective, with the public protesting over rising costs, inflation and the poor state of public services, becomes considerably more complicated when you start looking under the hood.
Whilst France has a long history of protesting and taking to the streets, that in itself isn't sufficient as an explanation. Nor can we simply point towards energy prices, education or the wider cost of living as isolated causes. Factor into the equation political and social tensions already at play within the country and you have a combination of factors where any one catalyst has the potential to ignite something much larger.
Although the scenes of burning cars and buildings are difficult to watch, and I suspect most of us would agree that those committing criminal acts should be held to account, it's important that we dig deeper to understand what's brought the country to this point. Not least because doing so can provide insights, good and bad, into what we may need to be aware of within our own countries.
Beyond the immediately visible causes of the unrest, sits a much deeper economic problem. France currently finds itself between a rock and a hard place as far as its fiscal position, debt-to-GDP ratio, government spending commitments and serious questions around how effectively funds are being allocated.
We can debate the motives behind the protests, particularly amongst the more violent factions, but the reality of increased living costs, dissatisfaction with public services and a rising sentiment of growing inequality exists regardless. What makes the situation even more complex is that whilst demands will continue to grow, the compounding consequences of decisions made by successive governments mean the options available to this or any replacement government are rapidly eroding. Every action has a consequence, meaning any measures implemented will carry pain to a greater or lesser degree for different parts of the population.
And this is where the discussion extends beyond what's happening in France, to potentially closer to home. Whilst the specifics can differ, from the scale of public debt to the growth outlook or quality of public services, a growing number of developed countries are finding themselves facing very similar pressures. In fact, it's getting to the point where the comparison is simply a question of which is the cleanest dirty shirt at the laundrette.
A Problem Decades in the Making
The increasingly challenging fiscal positions governments around the world find themselves in haven't developed overnight, nor are they simply the result of short-term catalysts such as the ongoing troubles in the Middle East. They're the consequence of decisions compounded over decades, allowing debt levels to quietly accumulate until they become increasingly difficult to manage.
We can look to current events further triggering inflation fears as countries scramble to deal with rising energy costs, the unprecedented fiscal and monetary stimulus during and after the pandemic, the measures taken during the Global Financial Crisis or the many smaller decisions made along the way by governing parties seeking to appease their voting populations whilst quietly adding to the growing debt pile.
As stated above, for every action there's a consequence, yet it's rare that the full implications of government spending are transparently shared with the wider public. Often, the explanation goes little further than assurances that funding has been secured from ‘somewhere’, or simply a request for trust that the money will be found.
Governments typically finance borrowing through issuing bonds purchased by domestic and international investors. Whilst these provide an established mechanism for financing national debt, they don't remove the obligation to service it. When debt can be refinanced at low interest rates, the consequences may attract relatively little attention. When borrowing costs rise, however, those obligations become considerably more expensive. Whether the public pays attention to bond markets or not, the resulting costs have a way of finding their way back to them, and this is precisely the position many countries find themselves in today.
Whilst it's neither necessary nor particularly realistic to expect governments to operate without deficits indefinitely, the real test is keeping debt within manageable limits. That requires sustainable budgeting, sensible investment and, importantly, sufficient productivity and economic growth to support those obligations.
Where these measures prove insufficient, particularly when growth consistently falls short of expectations, the available options begin to narrow. Governments can increase taxation, reduce or reallocate expenditure, borrow more or pursue policies intended to stimulate growth. On the face of it, this seems relatively straightforward. The budget is out of balance and action needs to be taken to address the situation.
The challenge is that pulling any of these levers impacts people…people who vote…and those votes are required to maintain power.
So, what happens? Difficult decisions get deferred, expenditure and debt continue increasing, and the anticipated economic benefits often fail to materialise before the cycle repeats with the next governing party. The problem is that each new government doesn't inherit a fresh budget. Its decisions to address past problems are layered on top of the financial commitments and debts accumulated by its predecessors.
And here we have the fiscal hamster wheel at play.
More Money, Same Problems
If there's only so much money to go around, then logically speaking, simply throwing more of it at problems isn’t likely to be the answer. At some point, the marginal returns diminish and we risk throwing good money after bad, accumulating increasingly unsustainable debt without seeing meaningful improvements in the problems we're trying to resolve.
Billions more for the NHS, education or infrastructure might sound like progress, but if the additional funding doesn't address the underlying problems within these services, then we're left with little more than good intentions and rather expensive ones at that.
Consider this from a personal perspective. If I'm incapable of effectively managing my household finances, allocating my income to cover bills, living expenses and the occasional luxury, then giving me more money isn't necessarily going to resolve the situation if my behaviours stay the same. I'd likely increase my spending across the board, only to find myself wondering how I've ended up back in the same position despite having more money coming in. This, by the way, seems to be a recurring theme for many in society, but that's a different topic for another post.
Now, it's admittedly simplistic to suggest that's how governments operate, but I suspect it's not entirely removed from reality either. I'm certainly not placing the blame at the feet of those working hard every day to improve the quality and delivery of public services. My concern is the disconnect between decisions made at the top and the people dealing with the challenges on the ground. Funding can be allocated far removed from where the problems actually exist, with layers of bureaucracy, competing priorities and shifting policies preventing it from reaching the areas where it could make a meaningful difference. And even when it does, the next government or budgeting cycle can come along and upset the apple cart all over again.
This raises another topic that, like many involving public services, tends to provoke polarising responses: the appropriate size of the state and the balance between publicly and privately delivered services.
Personally, I'd favour greater private-sector participation where competition can help drive innovation, efficiency and improved quality. However, whilst that’s a personal opinion, I'm also not suggesting privatisation is some magic panacea for all our woes. Without appropriate regulation, competition and incentives, private provision can produce equally poor outcomes.
What I do think warrants serious consideration is whether we're striking the right balance between the responsibilities government takes on and those that could be delivered more effectively through a competitive but appropriately regulated private sector. The objective should be better outcomes for the population, with policies that encourage quality and accountability whilst reducing unnecessary pressure on state-managed services. Simply bringing more services under government control isn't necessarily going to address the existing challenges of effective budgeting and delivery.
Aside from making the maths work, there's also the small matter of a marketing problem. Not marketing public services or private-sector alternatives but convincing the electorate of the need for difficult decisions that may take years to produce meaningful benefits.
Promising billions in additional funding is generally far more politically appealing than explaining why existing commitments need to be restructured, reduced or delivered differently. The former makes for a good campaign promise, whilst the latter requires convincing voters to accept short-term discomfort in pursuit of longer-term improvements. Not exactly an easy sell when your political future depends on securing enough votes at the next election.
And when the answer becomes finding ever more revenue to sustain that expenditure, we run into another problem: what happens when the methods used to raise that money start undermining the economic growth governments are depending upon?
Taxing the Very Growth We Need
The saying goes that nothing is certain but death and taxes, so it would be rather difficult to discuss government fiscal policy without touching on the latter.
Depending on which side of the political aisle you sit, the view may be that higher earners should contribute more, or alternatively that excessive taxation amounts to a form of productivity punishment. If we leave aside some of the more emotive arguments, there's still a fine needle to thread when it comes to striking the right balance.
Governments depend on productive economic activity to generate sustainable tax revenues, which, as we've covered, are necessary for keeping their fiscal affairs in order. If we want businesses to grow, they need to be able to invest. If we want entrepreneurship to flourish, there needs to be sufficient reward for taking risks, and if we want individuals to continue developing their skills and progressing professionally, there needs to be an incentive to do so.
Yet poorly designed tax policies can end up discouraging the very behaviours required to create the foundations for sustainable growth.
Recently, I came across an article in the FT Weekend titled Britain's £100,000 tax trap, which provides a telling example of the challenge at play.
In England, someone earning between £100,000 and £125,140 faces an effective marginal deduction of 62% on additional employment income when income tax and employee National Insurance are combined. This is primarily a consequence of the progressive withdrawal of the personal allowance once earnings exceed £100,000.
In other words, for an additional £10,000 earned entirely within that band, approximately £6,200 goes to the government, leaving £3,800 for the individual. For parents who lose eligibility for certain childcare support once their adjusted net income crosses the £100,000 threshold, the consequences can be even more significant.
Now, before anyone reaches for the world's tiniest violin for the plight of the 'well off', this is less about the impact on the individual and more about the knock-on effects from a wider economic standpoint.
The question is whether creating what effectively amounts to a financial penalty, or at the very least a significant disincentive to earning within that bracket, discourages the pursuit of the very productive activity required to deliver the government's proclaimed growth ambitions.
If someone decides that additional hours, greater responsibility or a promotion simply aren't worth the marginal financial reward, the consequences can extend beyond their household. Consider what happens when similar decisions are made across a wider population, particularly when skilled professionals, entrepreneurs and investors have the additional option of directing their efforts or capital elsewhere.
Of course, not everyone responds to taxation in the same way. Some will continue working regardless, others will restructure how they're paid, whilst some may genuinely reduce their activity or relocate. Increasing taxes most certainly generates additional revenue, particularly in the short term, but at what cost if it leads to longer-term consequences that reduce the size of the overall tax base?
It's naïve to assume taxation decisions have no behavioural consequences. To do so is to overlook a fundamental element of economics: human beings respond to incentives, and those responses don't always align with the outcomes policymakers intended.
There's a difference between increasing the percentage of the economic pie that government collects and creating the conditions for that pie to grow. One doesn't necessarily prevent the other, but given the fiscal challenges we've already discussed, governments can ill afford to implement policies that undermine the very growth they're trying to achieve.
Is France the Canary in the Coal Mine?
So, if we now come full circle and return to France, it's worth reconsidering the precarious nature of its fiscal position given what we've covered in the preceding sections. More importantly, whether the levels of public discontent and unrest we're witnessing are a signal of what could lie ahead for other countries following a similar trajectory.
France's government expenditure accounted for approximately 57% of GDP in 2025, yet the country continues to run substantial annual deficits and accumulate debt. By the second quarter of 2026, its debt-to-GDP ratio had reached 119%, increasing almost four percentage points over the previous year.
The uncertainty surrounding France's fiscal position hasn't gone unnoticed by investors and financial markets either. Without going too deep into bond market commentary, in October yields on French ten-year government bonds passed 5% for the first time since 2002. Whilst rising global borrowing costs have contributed; the increasing premium investors are demanding to hold French debt also reflects concerns around the sustainability of its finances and the ongoing political instability.
This risks accelerating France's fiscal difficulties further if left unchecked, with higher borrowing costs adding to the pressure on government finances as existing debt matures and needs refinancing.
So, the situation seems rather dire. Spending more now may provide some short-term relief as far as public sentiment is concerned, but risks further worsening the country's fiscal position. Increasing taxes or reducing expenditure may help restore some financial stability but is also likely antagonise at least parts of an already frustrated population depending on what route they take. Where does one go when every available option seems to present another problem?
With protests now gathering momentum in Italy, it's worth examining their situation on a comparable basis. They carry an even higher debt-to-GDP ratio of almost 140%, although unlike France, they've managed to make progress reducing their annual deficit in recent years. That said, their accumulated debt remains enormous and weak productivity continues to constrain growth prospects. It's a useful distinction that reinforces why these are complex economic situations to navigate. There's no magic debt-to-GDP threshold at which everything suddenly falls apart; the trajectory of debt, cost of servicing it and productive capacity of the economy all matter.
So, is France the canary in the coal mine?
I think there's a reasonable case for viewing it as a warning, particularly when we turn our attention closer to home.
In the UK, we've spent much of the past two decades struggling with productivity growth, our own increasing national debt and successive governments promising improvements to public services and living standards. Meanwhile, taxation has continued to rise without the population necessarily seeing corresponding improvements in the services they rely upon.
According to the Office for National Statistics, public service productivity in 2025 remained approximately 2.5% below its 2019 level. Then there's the cost of servicing our national debt, estimated by the Office for Budget Responsibility at £110 billion in 2025–26, making it the third-largest category of public spending behind health and welfare.
Of course, our circumstances aren't identical to France's. The UK retains control over its own currency and monetary policy, providing some additional flexibility, albeit not without the potential inflationary and economic consequences of excessive monetary expansion. I've explored the mechanics behind this in Demystifying Money and Trapped By Trillions, so there's little benefit in covering the same ground again here.
Personally, whilst I think we have numerous challenges with the UK economy, particularly our relatively limited growth in recent years, I don't believe we're necessarily on the verge of seeing unrest on the same scale as France.
But what happens if another few years pass with taxes continuing to rise, economic growth remaining disappointing and the government failing to deliver the improvements to public services and living standards that have been repeatedly promised?
At what point does disappointment turn into outright frustration? And what happens when the government's options for addressing that frustration have become even more limited by its ever tightening fiscal position?
What we're seeing in France may not represent our inevitable future, but I don't think we can afford to be complacent either. Continuing to accumulate debt without translating that expenditure into meaningful growth or improvements to public services risks further undermining confidence in government. The longer those problems persist, the greater the potential for a catalyst to light the touchpaper.
Can We Actually Get Off the Wheel?
We've covered how developed economies have various levers available to address their fiscal challenges. The question is whether governments have the political will to use them and, perhaps more importantly, the willingness to be transparent with the public about the consequences of their decisions rather than simply pursuing whatever is most likely to secure victory at the next election.
There's also an important part for the public to play. It's perfectly reasonable to demand better public services or question why we're continually being asked to pay more in taxes, but shouldn't we also be questioning how effectively existing resources are being used, where additional funding will come from and what the longer-term consequences might be? And not just asking those questions but demanding meaningful answers rather than settling for vague assurances and empty campaign promises.
Ultimately, economic prosperity isn't created simply by collecting and spending ever-increasing amounts of money. It requires an economy capable of producing more value, institutions that allocate resources effectively and governments willing to make decisions that serve the country's long-term interests rather than merely the next election.
Until we're prepared to look beyond the immediate headlines and examine those underlying problems, I suspect we'll continue mistaking the latest catalyst for the cause, whilst the fiscal pressures that have been building for decades remain largely unresolved.