By Yanis Varoufakis
October 9, 2026
In the hallowed halls of European policy-making, a dangerous narrative has taken hold. It is a narrative that mistakes fiscal contraction for economic prudence and labels any departure from the dogma of austerity as "nonsense." By delegitimizing moderate alternatives to severe budget cuts, the European centrist establishment is inadvertently creating a political vacuum. When the center refuses to offer a path toward growth and public investment, it leaves voters with only one electable rebellion on offer. Today, it is the far right that is all too happy to supply that rebellion. Nowhere is this dynamic more dangerously evident than in France.
The Symptoms of Structural Neglect: Schools and Stability
The recent, widespread demonstrations across France—centered on the deteriorating state of the nation’s public schools—are not merely a localized grievance. They are the latest symptom of a chronic, systemic malaise rooted in years of austerity. When the infrastructure of a nation’s future, its education system, begins to crumble under the weight of fiscal retrenchment, the social contract itself begins to fray.
Yet, despite the clear evidence that austerity is undermining the social fabric, the sirens of fiscal orthodoxy remain undeterred. They are not calling for a change in course; they are calling for more of the same. Emmanuel Moulin, the governor of the Banque de France, has recently intensified calls for significant budget cuts, citing the "risk of being gradually strangled by rising interest rates." This diagnosis, while technically grounded in a specific school of financial logic, ignores the broader macroeconomic reality: austerity in the face of stagnation is not a cure; it is a catalyst for decline.
Chronology of a Crisis: From Fiscal Discipline to Political Disenchantment
To understand the current crisis, one must trace the trajectory of French and European fiscal policy over the last decade.
- 2015–2019: The Post-Crisis Stagnation: Following the Eurozone debt crisis, France, like many of its neighbors, adopted a strategy of incremental fiscal tightening. While intended to stabilize debt-to-GDP ratios, it stifled the domestic demand necessary to spur a robust recovery.
- 2020–2022: The Pandemic Interlude: The COVID-19 pandemic necessitated a temporary suspension of fiscal rules. Massive state intervention prevented an economic collapse, providing a glimpse of what public-led investment could achieve.
- 2023–2025: The Return of the "Hawks": As inflation spiked, the European Central Bank (ECB) pivoted toward aggressive interest rate hikes. Simultaneously, the French government, fearing bond market volatility, returned to the rhetoric of austerity.
- Late 2026: The Breaking Point: The convergence of declining industrial output, rising costs of living, and the decaying state of public services has brought the French electorate to a boiling point. The protests in the education sector represent a shift from abstract economic concerns to tangible, daily frustrations.
Supporting Data: The Economic Reality
The argument for austerity rests on the premise that reducing government spending will lower interest rates and restore market confidence. However, the data paints a more complex and troubling picture.
France’s public debt, while significant, is not an isolated phenomenon. It is part of a broader European trend of stagnant productivity and deindustrialization. Germany, the continent’s former economic engine, is currently grappling with its own existential crisis as its energy-intensive industrial base struggles to remain competitive. When the core of Europe’s economy faces such structural headwinds, the imposition of austerity in France only accelerates the downward spiral.
Investment is the lifeblood of an economy. By slashing budgets to pay down debt, governments reduce their capacity to invest in innovation, green energy, and human capital. This leads to a decline in long-term growth potential, which in turn makes the debt-to-GDP ratio even harder to manage. It is a self-defeating cycle that the ECB and national central banks seem unable or unwilling to break.
Official Responses and the "Nonsense" Defense
The official response from institutions like the Banque de France is characterized by a narrow focus on financial stability at the expense of social cohesion. The argument—that we must cut now to avoid being "strangled" by the markets—is a classic example of "there is no alternative" (TINA) politics.
This rhetoric serves a dual purpose. First, it attempts to insulate technocratic decision-making from democratic oversight. By framing budget cuts as a mathematical necessity rather than a political choice, policymakers seek to avoid the scrutiny of the voters. Second, it serves to marginalize any opposition. When economists or politicians propose alternative models—such as debt-funded public investment in social infrastructure—they are dismissed by the centrist establishment as engaging in "nonsense."
This dismissal is not just arrogant; it is suicidal. By branding all dissent as illegitimate, the center is effectively telling voters that they have no voice in the economic direction of their country.
Implications: The Far-Right Surge and the European Fault Line
The political implications of this failure are profound. If the moderate center refuses to address the decline in public services and the stagnation of the economy, the political space to the right will continue to expand.
In France, the far right has mastered the art of co-opting the language of the working class, focusing on the decay of national institutions as evidence of the failures of the "globalist" establishment. They do not need to provide a coherent economic alternative; they only need to point at the visible degradation of the public sphere and offer a narrative of betrayal.
This is not just a French problem. Europe is witnessing a shift in its geopolitical and economic landscape. As the continent struggles to maintain its competitiveness in a globalized world, the internal divisions caused by austerity are making it increasingly difficult to form a cohesive response.
The Necessity of a New Economic Paradigm
To avoid the collapse of the social order, European leaders must abandon the obsession with fiscal austerity. A new paradigm is required—one that recognizes that public debt, when used to finance productivity-enhancing investment, is not a burden but a necessity.
- Investment over Austerity: European states must prioritize the revitalization of public infrastructure. This includes modernizing the education system, expanding healthcare capacity, and accelerating the green transition.
- Institutional Reform: The ECB must reconsider its mandate. A policy that treats all inflation as a monetary phenomenon to be crushed by interest rates—even when it is driven by supply-side disruptions—is fundamentally flawed.
- Democratizing Economics: The discourse around fiscal policy must be opened up. Citizens deserve to know that budget choices are not immutable laws of nature but political decisions that can and should be debated.
Conclusion: The Choice Ahead
France stands at a precipice. The demonstrations in the streets are a warning that the patience of the public is exhausted. If the centrist establishment continues to ignore these signals in favor of the cold, hard logic of fiscal retrenchment, they will only accelerate the rise of the very forces they claim to fear.
The far right does not win because they are right; they win because the center has vacated the field of common sense. To reclaim it, the establishment must stop labeling sensible, pro-growth alternatives as "nonsense." They must begin to govern for the many, not the market. If they do not, the "strangulation" of the French economy will not be caused by interest rates, but by the collapse of the democratic process itself. Europe’s next great fault line is not merely financial—it is deeply, irrevocably political. The time to change course is now, before the opportunity for a moderate, inclusive future is lost entirely.
