France's Unrest Deepens Amid Inflation and Debt

France’s consumer prices rose 3.4% in September from a year earlier as protests and rioting spread over the weekend. The government cut its 2026 growth forecast, and French bond yields reached their highest levels in 24 years. Rising prices, weak wage growth and fiscal strain now sit at the center of a crisis in the eurozone’s second-largest economy.

Protests and the cost of living

The unrest began the previous month. Students protested a lack of investment in education, pointing to run-down classrooms, missing teachers and school buildings not equipped for rising temperatures. Others joined in solidarity and denounced police tactics against the student protesters.

Demonstrations later turned toward the cost of living and higher fuel prices. Fortune said fuel prices had jumped because of the U.S. war on Iran. Complaints about schools and policing thus gave way to household costs as inflation accelerated.

French consumer prices increased 3.4% in September compared with the same month a year earlier, up from an annual rate of 2.6% in August. It was the fastest increase since January 2024. The government cut its 2026 growth forecast to 0.5% from 0.7%, after GDP grew 0.9% in 2025.

The average negotiated wage increase was 1.7% in the second quarter and had stayed largely flat for several quarters, according to the Bank of France. Unemployment was above 8%. Youth unemployment stood at 20%.

Debt pressure and political disaffection

Slow growth, high inflation, government spending and rising debt fueled a revolt in financial markets. French bond yields climbed in recent weeks to their highest levels in 24 years, reaching warning levels last seen during the eurozone debt crisis in 2011. Investors had little confidence that fiscal restraint would return soon.

Mujtaba Rahman, managing director for Europe at Eurasia Group, called the situation “a crisis of liberal democracy, a crisis of fiscal mismanagement, and a crisis of youth disaffection.” In a New York Times opinion article on Thursday, he wrote: “But the fiscal crisis is the most dangerous, underlying many of the country's woes and threatening to bring it to ruin. France, truly, is on the brink.”

The front-runners in France’s presidential election in the spring came from the populist far right and far left. The source article gives no further details about their platforms or the policies they propose.

The U.S. contrast

The United States also faced political dysfunction. Its national debt had reached $40 trillion, with no sign that large budget deficits would shrink. Fortune said the country benefited from the dollar’s status as the global reserve currency and a strong economy powered by an AI spending boom.

U.S. GDP grew 2.2% in the second quarter, and third-quarter growth was expected to reach 3.6%. The jobless rate was 4.2%, which Fortune described as signaling full employment; youth unemployment was about 10%. Yearly wage growth was about 3.9%.

Annual U.S. inflation stood at 3.7% in the latest consumer price index. It had eroded wage gains, but Americans kept spending. Corporate earnings remained strong, helping stocks stay near record highs. U.S. bond yields rose above 5%, partly reflecting faster GDP growth.

The Federal Reserve raised interest rates the previous month and was likely to raise them further as the resilient economy kept upward pressure on prices. Market veteran Ed Yardeni wrote in a note the previous month: “The economy is less rate sensitive than it has ever been because it is more services-heavy, increasingly supported by wealthy and lightly indebted retirees, and stimulated by large fiscal deficits and an extraordinary AI investment boom. At the same time, strong demand for capital and weaker growth in national saving may have pushed the neutral interest rate higher. That's why higher interest rates haven't produced the widely expected effect of weakening economic growth with a lag, nor do we expect they will.”