Article
Introduction
France’s financial situation is parlous and, if a bailout is needed, only the EU itself is capable of acting as a platform for it.[1] The result would be to make all the other EU member states liable for the size of the bailout package, which would need to be €2 trillion.[2]
Given the ongoing political and social unrest, there seems little chance that France will be able to master its predicament using the only two economic levers left to it as a result of its membership of the EU and the Eurozone: raising taxes or raising debt.
Every other power has been ceded to the European Union or the European Central Bank (ECB).
France’s predicament
France’s debts are 116 per cent of its Gross Domestic Product (GDP) of €3.7 trillion if one only counts the debts that fall within the scope of General Government Gross Debt.[3] If one includes the debts of public sector entities outside the scope of general government the percentage rises to 133 per cent of GDP.
The target rate for General Government Gross Debt under the EU Fiscal Stability Pact was 60 per cent of GDP by 2030, or a lower figure that would prepare France for projected extra social costs materialising up to 2050. France, with its ageing population and low retirement date, projects such extra costs, but it has no prospect of achieving the 60 per cent debt-to-GDP ratio by 2030, let alone an even lower one.
France is running an annual fiscal deficit of around 5 per cent of its GDP. This makes it subject to the EU’s excessive deficit procedure. The target for the fiscal deficit, under the EU Stability and Growth Pact, is no more than 3 per cent of GDP.
France’s tax burden is around 46 per cent of GDP, resulting in its recording the worst score amongst the 38 members of the Organisation for Economic Cooperation and Development.[4]
France cannot dig itself out of this hole within the EU economy
France cannot grow its economy at a rate exceeding its fiscal deficit, so as to increase tax revenues without raising the scope and rates of taxation, reduce annual borrowing, and reduce its debt-to-GDP ratio.
This is because the EU economic model is one of high costs, high regulation, low innovation, and consequential low growth. Regulation includes the measures to achieve Net Zero and these add costs, because the capacity to be built is replacement capacity, not new capacity, and the capacity being retired has not necessarily reached the end of its useful life.
France has surrendered its legal sovereignty
EU membership involves accepting the precedence of EU law over domestic law, and the jurisdiction of the European Union Court of Justice (EUCJ) over that of the highest court in France.
This surrender of legal sovereignty is embedded into the Treaty on the Functioning of the European Union.
EU law issued through EU Regulations automatically becomes member state law; EU law issued through EU Directives must be transposed into member state law; EU regulatory technical standards must be applied at member state level and overseen by a special public authority established at member state level.
A member state must be part of the Single Market and Customs Union, and can take no steps to favour domestic businesses over ones from other EU member states, such as adopting a ‘Buy French’ approach to public procurement.
France cannot boost its exports by signing new or better trade deals
External trade policy and the contents of international trade deals are not open to change that might benefit French businesses or its wider economy because such policies and deals are entirely within the remit and control of the EU.
France cannot pull any of the normal levers of currency management
As a member of the Eurozone, France has surrendered control of the main levers of currency management to the ECB. These levers are control of its money supply and its interest rate, and consequentially the value of its currency on foreign exchange markets: the value of its currency is locked in at 1-to-1 with trading partners who use the euro, and the levers for managing the rate of the euro against the US dollar, the pound Sterling, the Swiss franc and so on, are in the hands of the ECB.
This means that France cannot reduce the value of its currency so as to make its exports cheaper for foreign buyers, and to make imports more expensive for domestic buyers, thereby stimulating demand for the products and services of French businesses both within France and abroad.
France, like all other Eurozone member states, fails the test of being a ‘sovereign’, because it is not the sole user of ‘its’ currency, and because it has surrendered control of monetary policy to the ECB.
France is left only with 'full fiscal responsibility'
The EU phrase for where this leaves France, or any other Eurozone member state, is 'full fiscal responsibility'. This means raising or reducing taxes, and raising or reducing debt, within the guidelines of the EU Fiscal Stability Pact and the EU Stability and Growth Pact. Given those restrictions, the word ‘full’ is misplaced.
‘Fiscal responsibility’ is based on a nation’s debts being backed by the ‘full faith and credit’ of the nation. This means that all tax-liable entities (individuals, businesses, trusts and so on) must be part of an administrative and legal system to impose and collect taxation, and that the entities comply, with a minimum of evasion, black marketeering, ‘moonlighting’, and similar practices.
France would score highly in the efficacy of its system for backing its national debt with the ‘full faith and credit’ of French tax-liable entities. But that does not mean the system delivers the amounts of money needed to avoid a fiscal deficit and to keep debt under control.
The efficacy of this system for a nation like France is undermined firstly by the EU economic model, which is not engendering prosperity amongst French tax-liable entities to the degree that more tax can be raised without the scope and/or rates of tax being increased.
Its efficacy is undermined further because the EU includes Ireland, whose ‘Celtic Tiger’ business model sucks out taxable corporate profits, whilst creating infrastructure costs, low-wage employment and – through it – increased social costs for France.[5]
Thirdly the EU itself undermines the principle of member states having ‘full fiscal responsibility’ by introducing new levies of its own, as it proposes to do during the 2028-34 budget period in order to pay back the debts the EU took on to fund the Coronavirus Recovery Programme, now known as Next Generation EU.
The EU Investor Presentation dated 23rd June 2026 states on slide 37 that it will take out an extra 0.35 per cent of EU Gross National Income from member states to increase its ‘Own Resources’, and headings for the new levies are given on the European Commission’s own website.[6]
This propensity alone – of the EU to impose direct taxes onto member states – makes a nonsense of the concept of member states having 'full fiscal responsibility'.
The concept is flawed in any case: ‘full fiscal responsibility’ cannot exist where the major levers for controlling economic performance have been given away, and where what is left has such major breaches-in-the-dyke as the ability of other member states (such as Ireland) to pursue predatory and parasitic practices that exploit potentialities in the Treaty on the Functioning of the EU to the detriment of France, and the propensity of the EU to intervene negatively in France’s fiscal situation.
Leaving the Eurozone is a non-starter without leaving the euro as well
France cannot leave the Eurozone without simultaneously leaving the EU. If it tried to do the one without the other, it would not be able to switch its existing debt in euro into its new, national currency, without the EUCJ intervening on behalf of the European Commission to force it to keep debt in euro. The euro would then be a foreign currency for France and an ongoing lever of control over France in the hands of the ECB.
In practical terms, introducing a replacement currency is a measure that can only be enacted over a weekend prolonged by extra bank holidays, accompanied by the declaration of a state of emergency to deal with the inevitable resulting trauma. There is precedent for such measures being undertaken, but only in desperate circumstances.
This would be a reversal over a few days of what it took 12-18 months to prepare for, and even then 1st January 1999 was not a complete conversion: there was an unnecessary 36 month period of parallel expression of euro in legacy currencies, when it could have been 6 months, and an unnecessarily long period of 6 months of dual circulation of euro and legacy currency notes and coins, when it could have been a week.
Exiting the euro at very short notice would be a very high-risk measure, but possible.
France would need also to leave the EU and as quickly as possible after leaving the euro, and without any referendum or fulfilment of ‘constitutional requirements’ as contemplated in Article 50.1 of the Treaty on the Functioning of the EU: if France had declared a state of emergency, the President could decree this, although not without a challenge or possible reversal when the state of emergency was brought to an end, assuming it was brought to an end.
Article 50.2 describes a negotiation with the EU leading to a withdrawal agreement over a period of two years from the giving of notice by the withdrawing member state under 50.1. That was the Brexit process. France would have to ignore this, give notice under 50.1, and withdraw at once, in order to avoid a dangerous hiatus between euro exit and EU exit.
That is a leap into the unknown, and is contrary to all of the conceptions of what France’s role in the world is after the relinquishing of its empire.
Summary and conclusions
France now finds itself in a similar position to Greece and Cyprus before it, but on a ten times larger scale. It is locked into a sluggish economic system, and has ceded almost all of the levers to EU institutions that an autonomous nation could bring to bear to revitalise its economy.
It has also ceded its right to make its own laws in areas which EU institutions claim as part of their remit, which strangles at birth any attempts to pursue independent policies that might benefit France: in addition, the EUCJ would automatically back an EU institution against a member state in any dispute over the scope of an EU institution’s remit.
What is left is an empty carcass of control over France’s finances and economy. Being a Eurozone member state, its exit route to sovereignty can only be sudden, traumatic, and undertaken in the direst of emergencies.
[1] https://www.lyddonconsulting.com/the-european-union-itself-using-the-european-financial-stabilisation-mechanism-would-be-the-source-of-a-bailout-of-france/ accessed on 21 October 2026
[2] https://www.express.co.uk/news/world/2256313/france-debt-eu-news-financial-crisis-bailout accessed on 21 October 2026
[3] https://www.lyddonconsulting.com/overview-of-the-liabilities-of-the-french-public-sector-only-the-eu-can-provide-a-lifeline/ accessed on 21 October 2026
[4] https://taxfoundation.org/location/france/ accessed on 21 October 2026
[5] https://www.lyddonconsulting.com/ireland-the-manchester-city-of-the-european-union/ accessed on 21 October 2026
[6] https://commission.europa.eu/strategy-and-policy/eu-budget/long-term-eu-budget/eu-budget-2028-2034_en#new-own-resources-to-match-our-common-ambition accessed on 21 October 2026
