Bond market turmoil and the simultaneous mass student protests at French schools are not a coincidence and point to the generational tradeoffs made in government spending, according to Nobel laureate Paul Krugman.<\/p>\n
In a Substack post<\/a> on Thursday, the economics professor at the City University of New York\u2019s Graduate Center acknowledged that the high debt and deficits driving up French bond yields lately are not unique to the eurozone\u2019s second largest economy.<\/p>\n In fact, the U.S. is guilty of the same fiscal sins, especially as aging demographics push entitlement spending up faster than revenue comes in.<\/p>\n \u201cBut France does stand out, even among fiscally troubled nations, in one main way: its persistent inability to get realistic about retirement,\u201d Krugman added.<\/p>\n That\u2019s as France\u2019s official French retirement age, when workers can collect full benefits, was just 62 in 2023, while the average actual age of retirement was lower than anywhere else in Western Europe at only 60.4 years.<\/p>\n Meanwhile, French students are rioting in the streets to protest missing teachers, run-down classrooms, and buildings that aren\u2019t equipped for rising temperatures. Protestors blame years of underinvestment in public education.<\/p>\n Krugman drew a straight line from France\u2019s retirement largesse to the student unrest, highlighting the generational tensions over how to allocate public resources to baby boomers versus the country\u2019s youth.<\/p>\n \u201cThus the fiscal pressure caused largely by France\u2019s very generous government pension plan has led to cutbacks in other spending, notably on education,\u201d he wrote. \u201cFrance is effectively handing over large subsidies to older French at the expense of everyone else. Mass national student demonstrations should come as no surprise.\u201d<\/p>\n Of course, U.S. debt is also on an unsustainable trajectory as spending on seniors jumps amid more baby boomer retirements. But even some Republicans have expressed openness to tax hikes<\/a> to keep Social Security\u2019s trust fund solvent. <\/p>\n For his part, French President Emmanuel Macron attempted to raise the retirement age to 64, but intense political pushback has stalled those efforts. <\/p>\n And the front-runner in France\u2019s presidential election next year, far-right leader Marine Le Pen, has vowed to roll back the official retirement age to 62 and even previously suggested dropping it to as low as 60.<\/p>\n \u201cThis would be extremely expensive and is symptomatic of a general unwillingness on the part of France\u2019s rising right to face reality,\u201d Krugman said. \u201cAgain, this is hardly unique to France \u2014 think of all the false promises and claims Donald Trump has made. But for now, at least, financial markets believe that fantasy economics is an even bigger problem for France than for the rest of us.\u201d<\/p>\n