France's Debt Doom Loop, the October Riots & Why French Yields Crossed U.S. Treasuries

Let me check the latest on France.

It started in September with high school students striking over understaffed, overcrowded schools — demanding more teachers, renovated buildings, and scrapping Parcoursup, the university admissions platform they call opaque and unfair. A strike at one suburban Paris school got its demands met, but it lit a fuse. Videos of riot police using a banned headlock on a teenage girl turned public sympathy into rage, and the movement snowballed into unions, yellow vests, climate activists, and pensioners.

Last Saturday, October seventeenth, was the explosion — over half a million people in about a hundred and ten marches nationwide. In Marseille, protesters briefly broke into city hall and knocked over the bust of Marianne. Roughly a thousand police were injured, at least two people died, and a fifteen-year-old lost a hand to a stun grenade. The government admitted intelligence failures and police deployments that were too static, imposed curfews, and the interior minister offered to resign — Macron refused.

Today is Act Two. Seventy thousand officers are on the streets, ten thousand more than last week, with armored vehicles, water cannons, and helicopters. Paris shut down over twenty metro stations, shops boarded up, museums closed. By early afternoon about four hundred ten thousand had turned out — a hundred and ten thousand in Paris alone — with tear gas in Lyon, Marseille, Strasbourg, and clashes near the end of the Paris march at Porte de Vincennes. A hundred thirty-five arrests so far, down from twenty-seven hundred last weekend.

Two things make this more than a cost-of-living story. First, the economy: French bond yields are at their highest since two thousand two, the government is trying to pass an austerity budget, and Macron's approval is the lowest of his presidency with elections in May. Second, Marine Le Pen's National Rally is holding its congress in Orléans this weekend to launch her twenty twenty-seven campaign — polls put her ahead — and left-wing groups are counter-protesting there, chanting "Macron resign, Le Pen in prison." On top of that, a suspected Islamophobic drive-by shooting west of Paris on Friday killed a martial arts instructor and wounded five, including a twelve-year-old girl shot eight times.

The government's framing is that far-left militants and opportunistic looters hijacked legitimate grievances. The protesters' framing is that Macron's pro-business centrism hollowed out public services while inflation ate wages. Both are partly true, which is exactly why it's escalating instead of resolving.

One angle worth watching: similar protests are breaking out the same weekend in Italy, Spain, Albania, and Ireland. If this is a continental cost-of-living wave rather than a French exception, the European political map could shift fast.

Ok. ...at its lowest since twenty seventeen. Presidential election's in May, Le Pen's National Rally is polling ahead, and she's launching her campaign in Orléans this weekend — which

in May twenty twenty-seven, and Le Pen's National Rally is the polling favorite. Her party held its congress in Orléans this weekend — she's formally launching her campaign Sunday — and that drew thousands of left-wing counter-protesters chanting "Macron resign, Le Pen in prison." The government is blaming far-left militants for the worst of the violence, while the far right is pointing at migrants and radical Islam. Both framings are convenient. A drive-by shooting west of Paris on Friday killed a twenty-six-year-old martial arts instructor and wounded five others, including a twelve-year-old girl shot eight times — Macron called it a racist terrorist attack, and that fear is sitting on top of everything else.

The part I'd watch isn't the street fights. It's that similar protests are breaking out the same weekend in Italy, Spain, Portugal, Albania, and Ireland. France may be the loudest case of a European-wide squeeze — inflation, housing, public services cut to fund defense and debt — finding its outlet before an election year. The yellow vests in twenty eighteen were France-specific. This looks structural.

One angle worth digging into: whether the government's "ultra-left" narrative holds up against the arrest data, or if it's mostly opportunistic looting plus genuine grievance. I could pull the breakdown of who actually got charged.

Checking who actually drove the violence.

The government's story has three layers, and each holds up differently. Layer one is the peaceful core — half a million students, teachers, unionists, yellow vests. That's not in dispute. Layer two is the black blocs: organized anti-capitalist anarchists, roughly six to eight hundred nationwide per a twenty twenty-three parliamentary report, dressed in black with masked faces, who did the pre-planned political violence — arson, attacks on police, the Limoges town hall fire. One suspect there had a security watchlist file and ultra-left ties. Their signature, a circled A, showed up spray-painted across cities. That layer is real and documented.

Layer three is the looters, and this is where the government's story strains. In Marseille alone the prefecture counted thirty thousand looters against eight thousand rioters. Nationwide, over three thousand shops were hit. The people showing up in fast-track courts are eighteen-to-twenty-five, male, French nationals, mostly first-time offenders with no political affiliation — an eighteen-year-old accounting student and an electrical engineering student looting a sneaker shop in Brest. Darmanin himself admitted half those jailed had clean records. TikTok acted as an accelerator, guiding kids to smashed storefronts.

The Paris prosecutor, Laure Beccuau, said on TF1 she could "absolutely not confirm" the rioters were ultra-left politicized. And Mediapart published messages from a territorial intelligence commissaire saying his service was told, word for word, to write that LFI was behind the movement when that was "objectively false in the general view" of the intelligence officers. The September intelligence note Le Monde obtained did flag outside far-left influence at six of twenty-seven school actions in Seine-Saint-Denis — but Le Monde's own reading was that it showed organizations surfing a spontaneous student movement, not steering it.

So my position: ultra-left was present, did real damage, and has a history — the Lyon student beating case, the Jeune Garde Antifasciste milieu. But "involved" and "led an insurrection" are different claims, and the government has published no court records or arrest breakdowns tying specific acts to LFI or organized networks. The convenient version lets Macron look tough on sedition, lets Le Pen look tough on crime, and buries the part where police lost control because they expected two hundred thousand protesters and got five hundred fifty thousand. The structural anger was the fuel. The black blocs were the match. The looting was the fire nobody planned.

Want me to go deeper on the Mediapart intelligence angle, or on how Le Pen's polling shifted after the riots?

Searching for France's economic troubles.

France is basically in a doom loop. Debt's at about one hundred nineteen percent of GDP — three point six trillion euros — the highest since World War Two, second only to Greece and Italy in the EU. The deficit's five point four percent this year, and the government's trying to squeeze it to five with a fifty-four billion euro cut package for twenty twenty-seven. But even if they pull that off, debt still climbs past one twenty-one percent next year.

The killer is interest. Next year's debt payments hit ninety-one billion euros — more than defense and education combined. That's up from sixty-two billion this year, and it could double again by twenty thirty as old low-rate bonds roll over.

Meanwhile growth got cut to about half a percent, the economy actually shrank in the first quarter, business confidence is at its lowest since the first Covid lockdown, and unemployment's climbing toward eight and a half percent. Inflation's ticking back up to nearly three percent, driven by the energy shock from the Iran war pushing oil toward a hundred twelve dollars a barrel. Household purchasing power is falling.

On top of that, ten-year bond yields just crossed five percent for the first time since two thousand two, and the spread over German debt blew past one hundred seventy basis points — the widest since the eurozone debt crisis. Credit default swaps are at their highest since then too. Goldman Sachs is openly asking whether this is twenty eleven all over again.

The structural problem is that French state spending runs at fifty-seven percent of GDP versus a eurozone average around forty-eight. Pensions alone are over thirty-two percent. Macron's pension reform got scrapped in last year's budget fight, so that lever's gone. And with a minority government and elections in May, nobody wants to be the one enforcing austerity on a country already in the streets.

The grim arithmetic: stabilizing the debt ratio would need a deficit around three and a half percent. They're at five and a half. That gap is what markets are pricing in.

One thing that stands out to me — Mélenchon on the left wants to cancel part of France's ECB-held debt, Le Pen on the right wants a hundred forty billion in cuts plus slashing EU contributions. Both are electorally popular and both would likely send spreads vertical. The market's basically forcing France to choose between a fiscal crisis and a political crisis, and the protests are what happens when you try to do both at once.

It wasn't one decision. It's a twenty-five-year slide that started from a comfortable place — debt was only about sixty percent of GDP in two thousand. Then three things stacked.

First, the social model itself. France spends fifty-seven percent of GDP through the state, pensions alone over thirty-two. That was built for a growing, younger population with cheap money. Neither condition holds anymore.

Second, the shocks. Two thousand eight, COVID in twenty twenty — deficit hit almost nine percent, debt jumped fifteen points overnight. Then the Ukraine war froze electricity prices to protect households, which is still bleeding money. Each crisis got answered with spending because cutting during a shock is politically suicidal.

Third, and this is the part that makes it self-inflicted: Macron's tax cuts. He replaced the wealth tax with something much narrower, cut corporate rates, betting growth would pay for itself. It didn't. Growth stayed around one percent. So revenue fell while spending kept rising.

Then the pension reform in twenty twenty-three — the one structural fix that could have bent the curve — got rammed through by decree, triggered the worst riots since sixty-eight, and a year later got scrapped entirely in the first budget standoff. So the country burned political capital to pass a reform and then threw it away.

Now you've got a minority parliament that's had three prime ministers in under a year, an election in seven months, and a bond market that stopped believing the math. The yellow vests in twenty eighteen were the warning shot — people said the state can't afford both the lifestyle and the debt. Nobody in power wanted to hear it.

The uncomfortable parallel: this is what happens when a rich country's promises outrun its growth for two decades and the interest bill finally comes due. Greece got there faster because it was smaller. France is just slower and louder about it.

There's a version of this story where the ECB steps in like it did in twenty twelve and buys time. But Lagarde's room to act is narrower now, and Bruegel's analysis says she'd need Paris to show real adjustment first. That's the bind — the thing that would calm markets is the thing the streets won't let happen.

Let me pull the latest US numbers.

The parallels are real, but the escape valves are different. Both are running deficits that would have been unthinkable a decade ago — the US just posted a two trillion dollar gap, six point two percent of GDP, which is actually worse than France's five point four. Interest is now the second or third biggest line item in both budgets. US net interest hit a trillion dollars, gross over one point three trillion, more than defense. Ten-year yields are both above five percent, and on October twenty-second France's actually crossed above America's for the first time since twenty thirteen — that hadn't happened in thirteen years.

The similarities go deeper than the numbers. Both have aging populations with pension and healthcare promises that grow faster than the economy. Both have political systems that can't pass a budget without crisis. Both saw the same global bond selloff this year, and Bank of America found the two countries' ten-year yields have been moving in near lockstep — same cause, cheap debt for twenty years creating the incentive to borrow more.

But here's where they diverge hard. The US owes in dollars it prints. France owes in euros it doesn't control. Over half of French debt is held by foreign investors who can walk; only about a quarter of US debt is. French private sector debt — households plus companies — is roughly three times GDP, double the American level, so France has less room to absorb a shock through private balance sheets. And the growth gap is brutal: America grew over two percent last year with AI capex still roaring, while France managed half a percent and is the only major advanced economy where activity is slowing in twenty twenty-six.

The CBO's own math is the quiet horror story for the US side. Debt held by the public hits one hundred twenty percent by twenty thirty-six and one hundred seventy-five percent in thirty years. Interest goes from a trillion to over two trillion. That's not a crisis, that's a slow squeeze — and it's the same squeeze France is living through right now, just with a bigger cushion and a printing press.

The one thing I'd flag: the US cushion isn't infinite. If the dollar's reserve status erodes even partially, or if AI spending cools and growth drops toward French levels, that escape valve narrows fast. Steve Eisman put it well — the entire global financial system runs on Treasuries, which is the only reason America's worse deficit hasn't triggered a French-style panic yet.

Want me to go deeper on what a US version of the French bond crisis would actually look like, or how the Fed's options differ from the ECB's?

Steve Eisman put it bluntly: the entire global financial system runs on Treasuries. If that status weakens, even a little, the US loses the ability to borrow at a discount the rest of the world can't match — and suddenly it's playing France's game with France's constraints, minus the riots. The transition wouldn't be a cliff, it'd be a repricing: higher term premiums, more foreign demand needed at worse prices, and a Fed boxed in between inflation and fiscal dominance. That's the scenario where the two countries stop looking like twins and start looking like the same patient at different stages.

The thing nobody's pricing is the feedback loop on the other side — if US yields stay above five percent, mortgage rates stay above six and a half, which cools housing and consumer spending, which slows the AI-driven growth that's currently the only thing keeping the deficit from looking even worse. France doesn't have that loop because it never had the growth to lose.

Want me to go deeper on what a partial loss of reserve status would actually look like in markets, or how the Fed might respond?