Name: Why Macronomics Hit a Wall
Uploaded: 2026-01-10T18:26:51.000Z
Duration: 13 min 25 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...

Basic passive voice

He was young, he was smart, and he was supposed to embody a French Renaissance.

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In 2017, 39 year old Emmanuel Macron won the French presidency with a supply side economic program aimed at lowering taxes, cutting unemployment and reducing public spending.

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He wanted to unleash the energy of the country because he has this very pro business image.

It really was the final piece of the puzzle that was missing.

The idea was to make the economy more dynamic in order to be able to afford the generous welfare.

But over the years, the plan fizzled out.

By the end of 2025, France's debt to GDP ratio had skyrocketed to 117% and is projected to reach 120% by 2027.

Meanwhile, GDP growth has stayed low with a rise of only 0.7% below the Eurozone average of 1.3%.

The paradox is that Emmanuel Macron came to power on an agenda of strong public finances and a dynamic French economy.

Fast forward eight years, you actually see a greater debt and an economy that is not growing very much.

So what went wrong and why does France's economy still feel broken?

When looking back at the past eight years, it's fair to say France hasn't had a smooth ride and neither has Emmanuel Macron.

First there was the Gilesion, then the pandemic, Russia's war on Ukraine and the resulting energy crisis.

A reelection, the pension reform and some self inflicted wounds like the dissolution of parliament in 2024.

But beyond global external factors, Macron's economic policies didn't give him the results he'd planned.

This is the place to be to invest, to work, to invent, to launch your business, to become a start upper.

The idea was that by lowering taxes for companies, in particular for individual, well, this would help revitalize the economy altogether.

Flat tax basically capping at 30%, the taxation on investment income, suppression of the wealth tax replaced by a real estate tax.

So supply side policies, which probably went in the right direction with the former president.

There were some propositions to do some very high taxes which actually created a bit of a brain drain.

And there was really this feeling of France is hostile to entrepreneurs.

The launch of the startup nation was embodied by Station F, the world's largest startups campus.

When Station F arrived, Macron arrived, that really changed.

People understood that it's okay to launch a business here.

Foreign direct investment began to flow into France's tech scene.

And in 2019 France overtook Germany and the UK as the top FDI destination in Europe.

And that investment seems to be making an impact.

In 2016, France counted only three unicorns companies worth $1 billion or more.

By 2025, that number had increased by a tenfold to 30 unicorns.

When we started in 2017, our companies raised 350 million.

Well, this year our companies raised 1 billion in the first nine months of the year.

That's the equivalent of the whole country of Italy just happening at Station F.

The poster child of success is Mistral AI and the set for the AI scene.

Actually, France is very well placed in Europe.

Of our 1,000 companies on campus, roughly is around AI.

We have some climate, we have some robotics, which is still linked to AI.

Another success of Macron's was reducing unemployment, France's long standing bugbear.

Since the 1990s, unemployment is near some historic lows in France.

Certainly some of the structural reforms I brought in helped with that.

More flexibility for companies to hire and fire workers as well.

We're still giving some protection, allowed to retrain some of the workers as well.

Unemployment has dropped noticeably since 2015.

That year, 10.4% of the labor force was unemployed.

However, France's youth is still out of work.

Although following the same trend as other age groups, youth unemployment still stood at 18.5% in 2025, a stark contrast to Germany's 6.6% rate.

While fixing employment is a priority in most countries, it's especially key in France.

That's because pensions are mainly funded through employees contributions.

France's current pension system started in 1945, just after World War II.

Workers contribute to a fund that pays for their elders pensions with the expectation that they'll be able to collect their own pension through the future workforce.

That system might have worked in the 20th century, but demographics have changed.

In 1960, France counted four workers for each pensioner.

In 2023, that ratio plummeted to just 1.8 workers per pensioner.

To solve this, contributions are regularly rising, but that makes a dent in workers purchasing power.

Another potential solution to the problem was raising the pension age, a reform Macron's government proposed in 2023.

Despite mass protests, the measure was ultimately passed.

However, the reform was paused in December 2025 to ease political tensions.

You have a whole group above 55 years old are too young to retire, but

The main reasons for unemployment include a skills mismatch with job opportunities and employer uncertainty about future growth.

Another factor often cited is the difficulty of letting go of employees.

That is, until the 2023 labor market reform gave companies more latitude.

There is more flexibility than people are usually aware of.

Outside of France, there's some labor market reforms, the introduction of some experience rating what we call bonus mallous system to make firms accountable for their layoff capping basically the amount of money which can be demanded from firms when they dismiss a worker.

That's important, but we have to do it in an efficient way.

There are lots of wrong policies in labour market protection, and this applies to both workers and companies.

Normally, when an employee resigns, they aren't entitled to unemployment benefits.

But in France, if both parties agree to dismissal by agreement, the employee can claim benefits while the company is protected from wrongful dismissal claims.

And that's ultimately at the expense of the Social Security system.

The dismissal by agreement system cost the state an estimated 10 billion euros in 2024.

We do have nearly 40% of companies that say that they're actually able to get up and running thanks to unemployment benefits.

People can take six months off or a year off, say they have been fired by the firm and get unemployment benefits.

While France has a relatively average corporate tax rate for Europe, at 25%, it surpasses its neighbors in employer Social Security contribution.

On average, employers bear cost equivalent to around 45% of an employee's gross salary.

But on the flip side, companies also benefit from subsidies.

BPI France, which is the sovereign fund in France, is funding over 50% of our companies here.

And that's directly because they're also investors in a lot of funds.

But there's also ones for research and innovation, which is one of the most advantageous tax credits that we have in Europe.

Do you remember Mario Draghi's famous 2012 speech?

The ECB is ready to do whatever it takes to preserve the euro in 2020.

Macron mirrored that approach with another whatever it takes moment.

France is one of the most redistributive countries of the developed economies.

And suddenly what we've seen, the answer to the multiple crises over the past few years, is to kind of redistribute and give more money.

Take the pandemic's 1 off 150 billion euros state guaranteed loan to keep businesses afloat, or the 26.3 billion euros worth of subsidies in response to the surge in European energy prices following Russia's war on Ukraine.

Like everywhere Else there were adverse selection in the sense that zombie firms took advantage of that to stay alive longer.

Because these loans were open to all firms without vetting the sector or viability.

State funds helped keep these soldiers, called zombie companies, afloat.

Now bankruptcies in France are surging to catch up.

A recent Senate report also found that French businesses received between 108 and 211 billion euros worth of tax relief and subsidies in 2023, with little follow up or monitoring.

This is a very difficult policy to perform because we don't have the information usually about whether the companies are still, still worth it, worth preserving now in terms of taxing the firms.

It's a very bizarre situation where we tax firms a lot and then we realize that and then we give them some stuff.

So the policies we use are not necessarily the best thing.

Macron has tried to actually reduce, for example, production tax, which are taxes, for example, that are on turnover rather than profits.