Name: France’s Economy Is Collapsing, And Its Far Worse Than You Expect
Uploaded: 2025-08-29T18:07:30.000Z
Duration: 12 min 40 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

The French economy is on the brink of catastrophe.

The French prime minister is warning the country to take drastic measures before the entire economy collapses.

The crisis that is in France is way worse than a lot of people expect.

It might seem like an exaggeration, but if you give it a closer look, you will find out that France is mathematically headed into a bankruptcy and if France is not going to change its policies today, France is over.

If you think that I am exaggerating, let me explain.

Over the last 25 years, France has accumulated so much debt that most people cannot possibly imagine.

And compared to France, the US debt crisis doesn't seem like a big problem.

You see, in 2008, when the global economy has collapsed, the French economy was overexposed to the United States and the global economy, which led many financial institutions in France to go bankrupt, which forced the government to intervene and borrow as much money as possible to save the economy.

That's when the French debt to GDP ratio has almost doubled in a couple of years.

It is normal for countries to borrow money when there is a crisis.

But when you are out of crisis, you are supposed to pay off that debt.

But here is the trap that the French government fell into.

After 2010, bond rates all across the globe has went down dramatically.

So borrowing money between 2010 and 2021 was dramatically lower than ever in history.

You could borrow money at 1% interest rate.

So French politicians started massively borrowing money, and you can clearly see that if you compare debt to GDP ratio of France.

And then in 2020, a crisis happens which forces the government to yet again borrow as much money as possible to save the French government.

You are forcing people to stay in their homes, so you gotta pay them something so that they don't starve to death in their houses.

So the debt to GDP ratio almost reaches 120%.

France since then has slightly paid off some of its debts, but it's still very high at 114%.

When there is a crisis and you borrow that money at such a low interest rate, the crisis is over, maybe it's time for you to pay that debt off.

And if you don't do that, and the time to pay off the debt comes, what are you going to do?

But interest rates now are higher than they were back in the days when you borrowed the money, so you will have to refinance it at a much higher interest rate.

Imagine if you go and borrow a million dollars at 1% interest rate, which is not a lot of  money.

By paying 10K annually, you can manage your debt.

Suddenly 5 years later, you have spent a million dollars, and now it's time to pay off your debt.

You would go and borrow money, but this time, you will borrow that money at 3.5% interest rate.

So your interest payment suddenly went from 10K to 35K, which makes it much more difficult to sustain that debt.

And that is the problem that the French government has found itself.

Because now, the rates on 10-year government bonds in France have reached 3.5%.

And they are very unlikely to go down any time soon, since bond rates all across the globe has increased dramatically since there has been massive inflation all across the globe.

If you look at the interest payments, they have exploded over the last couple of years.

In 2021, the French government have made 35 billion dollars or euros in interest payments.

By 2025, that number has increased to 67 billion euros.

Basically, the interest payments doubled in the last couple of years.

Now, if you compare that to military spending of France, then you can see the problem.

In 2021, France has spent around 40 billion euros to maintain its military.

By 2025, that number has grown to 50 billion euros.

So basically, France now is spending more to sustain its debt than on its military.

And the French military is one of the largest militaries in the world.

And militarily, France is one of the most powerful countries in the world.

What does it tell you about the state of the economy when you are spending more to sustain your debt than to maintain your military?

Even the United States is not yet in that position.

And yet, the US debt is much bigger than the French debt.

What makes the entire situation even worse is that the debt continues to compound if you do not pay it off.

See, when you have your credit card debt and there is an interest, it doesn't matter what is happening.

As long as time continues going and you are not making your interest payments, your debt continues to grow.

Last year, France had a deficit to GDP ratio of about 5.8 percent, which is a lot.

So even though that France is in such a huge debt problem, last year, France has borrowed 170 billion dollars to make sure that it doesn't go bankrupt.

Next year, that number is going to grow to 175 billion dollars.

And with every single year, since France has no money to pay off its debt, that debt will continue accumulating and compounding year by year.

Some people might say that, well, the United States has the exact same problem.

You see, the difference is that the United States has the global reserve currency.

So the United States has the option to borrow its way out of the debt.

But the French economy does not have that option.

Especially if you look at the United States that is leading the world in AI.

You don't hear many startups that are coming out of France.

And what makes the entire situation even worse is that the French debt is mostly held by foreign investors.

Half of the French debt is being held by investors outside of France, which means that if France now defaults on its debts, it is going to ruin its credit score and it will no longer be able to borrow money because nobody is going to trust the French government.

Japan, for example, has a much higher debt to GDP ratio compared to France, but most of the Japanese debt is being held by the Bank of Japan, but that's not the situation with France.

Around 15% of the French debt is being held by the EU central bank.

Another 10% is being held by the French insurance companies.

The insurance business or the insurance industry is the backbone of multiple other industries across the country.

So if the French government will default on its debts, then these French insurance companies are going to go out of business, which is going to destroy multiple industries and will cause an economic chaos.

Which is why France has to do something and somehow pay off its debts, even if it does not have that money.

And unlike the United States that controls its own currency, France does not control its own currency, because France is part of the European Union and it uses the Euro.

So if the EU central bank is going to overprint money to save the French economy, it is going to cause massive inflation all across the European Union.

The question is that, other European countries who do not have this kind of a problem that France has, will they agree to save France at their own expense?

So the only two solutions is that either France has to do something and grow its GDP massively, but that's unlikely to happen.

Because over the last 25 years, France has been growing very, very, very slowly.

Its GDP growth has averaged at about a little over 1%, compare that to the United States that had a growth rate of over 2% over the last 25 years.

And this growth was managed when the French government was borrowing massive amounts of money over the last 25 years.

From now onwards, it no longer can borrow that much money.

Can it still grow its economy by the exact same 1.25%?

But that's not enough to solve the debt problem.

If France wants to solve its debt problem, its GDP must grow by about 2.5%, which is not happening.

Over the last 25 years, it barely broke the 2% barrier in some of the years.

Last year, the GDP of France has grown by 1.2%, a year prior to that, it was 0.8%.

And this year, it's probably going to be a little over 1%.

So expecting that France is going to solve the problem by growing its economy tremendously faster than the United States or China, let's be honest, that is not happening.

We can literally take that idea and throw it in the garbage because that is not happening.

So the second solution for France is to simply cut spending and start paying off your debts.

You're collecting a certain amount of money from your taxes.

So you take that money and instead of paying pensions, instead of paying, improving the infrastructure, instead of spending it on your country and making your country much more better and much more successful and much more safer, you'll take that money and you will start paying off your debt.

At least you will bring your debt to GDP ratio to a sustainable level, let's say to about 80 to 90%.

From now, from then onwards, then you can allocate a smaller portion of your budget into the interest payments.

But if you do that, there is going to be a slower economic growth.

The biggest factor or the biggest driver of the economy is always the government because nobody can spend as much money as the government.

The biggest driver of the GDP is the government because government is the biggest spender.

You're raising so much money from taxes and then you're spending that money and the economy grows.

If the government will start doing the absolute opposite, which is cutting spending, how fast do you think the French economy is going to grow?

If it didn't grow that much over the last 25 years with massive government spending, what is going to happen next?