Protests in France began particularly in response to the decline in quality and poor conditions of public schools, but quickly transformed into a broader and more widespread movement. These protests include demands such as rising costs of living, lack of opportunities for youth, and low pension rates.
Pressure on Macron's Government
Emmanuel Macron's government has been caught off guard by this crisis and is under pressure. Unrest and vandalism have spread in some key cities, and authorities have imposed nighttime curfews in several cities to control the situation.
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Alongside these protests, financial markets are showing worrying signs of investor distrust in French government bonds. France relies on issuing bonds and other debt instruments to cover its current expenses, but since early September ٢٠٢٦, the risk premium on these bonds has significantly increased.
Financial and Economic Challenges
This increase in risk premium reflects investors' concerns about France's ability to manage its debts. Although the French government is still able to secure the necessary funding, the Ministry of Economy has acknowledged that due to decreased investor demand, long-term bond sales have declined.
According to Paul Krugman, Nobel Prize-winning economist, financial markets have suddenly viewed France as a new patient in the Western economy. Macron's government is trying to reduce the public budget deficit by passing budgetary measures, but these efforts have faced parliamentary opposition and protests.
Economic problems, especially regarding rising debt costs, which economists refer to as the "snowball effect," have created further challenges for the government. In this situation, any increase in financing costs could put more pressure on the government's budget. Nevertheless, the French Minister of Finance has stated that the country is currently safe from the "snowball effect" of debt.
However, the intensity of the snowball effect depends on the existing debt level, and given that France's public debt is estimated at about ١١٩% of GDP, the country is more sensitive to financial risks than many other countries. As a result, Macron's government is striving to prevent a major financial crisis by controlling unrest and restoring investor confidence.
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