Rahul Jacob: The unrest in France reflects the failure of European centrists

Copyright © HT Digital Streams Limited All rights reserved. From politics to fiscal policy, the French mess reflects the failure of European centrists Rahul Jacob 4 min read 22 Oct 2025, 12:30 IST Political instability has only increased since last year’s snap election that Macron hoped would undermine the far right led by Marine Le Pen’s Rassemblement National. (AFP) Summary The Louvre heist joins a tax policy muddle in Paris to signal faltering government even as the fiscal deficit widens dangerously. As in the UK, poor tactics by centrist leaders to stem the rise of the far right – driven by immigration fears – may have led France to this sorry state of affairs. Even by the dysfunctional standards of France’s recent political trajectory, it has been an eventful month in Paris. A prime minister resigned after failing to push through fiscal reforms, but was then reappointed by President Emmanuel Macron to try again. The theft of jewelry worn by 19th-century French royalty from the Louvre when the museum’s doors opened on October 19 seemed like a metaphor for the country’s problems. A country that is a byword for luxurious luxury, has an economy dominated by companies such as LVMH and Hermes and an over-extended state. (A request for additional funding to better protect the Louvre has been pending for some time.) The problem is that the very rich in France are using their power to fight higher taxes, despite effectively only paying half the average rate of income tax by shielding their wealth in holding companies. An economist’s proposal for a wealth tax on people worth more than €100 million has been derided by LVMH owner Bernard Arnault as a reckless attempt to “destroy the French economy.” Since snap parliamentary elections in 2024 weakened the government’s position instead of strengthening it, the Macron administration has had to rely on support from left-wing parties to pass legislation. At that end of the political spectrum, melodramatic overreactions to reasonable reforms are hardly uncommon. The left blocked attempts to reduce the generous holidays for which France is known, even preventing the cancellation of two bank holidays. A government move to raise the retirement age to 64 from 62, aimed at reducing pension costs and the fiscal deficit, had to be delayed. That deficit is now close to 6% of GDP and well above the Eurozone average, beating Italy and Greece. Its widening is a function of large-scale government spending in the wake of the pandemic (and then of the energy crisis after Russia attacked Ukraine) and Macron’s tax cuts in 2018. Gross public debt as a percentage of GDP is around 113%, well above the Eurozone average. If this sounds like a shipment from a fantastically elegant foreign country falling on hard times, think again. Macron’s tax cuts for corporations and the wealthy are not unlike India’s cut in its corporate tax rate to 22% in 2019. Since India’s tax cut has little to show in terms of boosting corporate investment, it should be labeled charity for the rich. An inheritance tax, even in unequal India, is rarely discussed. At the other end of the spectrum, what regularly headlines as handouts increases with every state election. This week in Frontline, economist Ashoka Mody, author of India is Broken, reminds us that it was the new working class in Western Europe’s industrializing societies that helped build support for their welfare states, which focused on delivering health and education in a more equitable manner. In contrast, private sector employment growth in India is mainly in the gig economy. ‘Delivery drivers’ with almost no job benefits maneuver through our congested cities to somehow deliver at Olympic speeds promised by overhyped e-commerce companies valued in the billions. Against this contemporary Dickensian backdrop, Mody argues: “India has replaced true welfare—education, health, justice, and environmental care—with short-term handouts that buy loyalty but impede progress. They siphon resources from public goods and keep the weak going, yet vulnerable. (It) is dependency by design.” France is characterized by similar cynicism as it faces the challenges of its dysfunctional political economy. Political instability has only increased since last year’s snap election that Macron hoped would undermine the far right led by Marine Le Pen’s Rassemblement National. Now led by the young Jordan Bardella, this party is leading opinion polls in France. Meanwhile, the rich have voted with their trust funds and are moving cash to tax havens like Luxembourg. They are reacting – or overreacting, probably – to a new French levy on 10,000 holding companies, whose dividends are often diverted to avoid tax, which is likely to raise €1 billion. An additional tax on France’s 20,000 highest earners was expected to raise €1.5 billion. Another tax on corporate income of large companies has also been proposed. Roland Lescure, Minister of Finance, has his work cut out for him. By dodging higher taxes needed to reduce gaping deficits, the very rich become nomadic. This week, a tax lawyer in Luxembourg told the Financial Times that since the 2024 election, “brokers hardly need to do any marketing work to get clients.” Another expert said that “crazy” amounts of money from wealthy sportsmen and entrepreneurs were flowing into Switzerland from France. This is similar to the outflow from the UK after its Labor government introduced changes to tax laws aimed at making those who class themselves as non-domiciled in the UK pay a greater share of tax. France’s predicament mirrors the UK’s. Just as former prime minister David Cameron opted for the disastrous Brexit referendum of 2016 to call the bluff of Nigel Farage’s Reform Party, Macron and his allies have been obsessed with curbing the popularity of the far right. But improper reversal of policy and their short-term political tactics since the 2024 elections have had the opposite effect. As the UK’s far right – aided by hysteria over immigration – basks in the same kind of popularity enjoyed by their counterparts in France, Europe’s centrist parties are floundering. The author is a former Financial Times foreign correspondent Get all the business news, market news, breaking news events and latest news updates on Live Mint. Download the Mint News app to get daily market updates. more topics #Taxation #FiscalDeficit #Luxury Read next story