The aftermath of large-scale protests in France on the 17th is spreading to the bond markets of France as well as Italy. Concerns have grown that the momentum to reduce fiscal deficits through austerity has weakened, causing government bond yields in these countries to surge.

According to Bloomberg and Reuters on the 19th (local time), the yield on France's 10-year government bonds spiked by 0.13 percentage points intraday to reach 4.93% per annum. The yield on Italy's 10-year government bonds rose to 4.54% per annum. The yield spread of French bonds over German bonds widened to 1.46 percentage points, marking the highest level since 2012.

French government bond yields have surpassed the levels seen in Greece during the early stages of the 2009 Southern European debt crisis. When the eurozone debt crisis began in October 2009 after the Greek government revised its annual fiscal deficit forecast from 6% to 12% of gross domestic product (GDP), the yield on Greece's 10-year government bonds was around 4.5% per annum.

In terms of fiscal indicators, France has closely approached the Greece of the crisis era. In 2009, Greece’s ratio of government debt to GDP stood at around 128%. France’s national debt stood at 119% of GDP as of the end of the second quarter of this year. As of June, France's total debt scale reached 3.596 trillion euros (approximately 5.356 quadrillion won), which is 12 times the scale of Greece's debt.

Consequently, concerns are rising that a fiscal crisis in France is imminent. The French government plans to issue a record-breaking 340 billion euros (approximately 507 trillion won) worth of government bonds next year. As bond yields soar, France's debt interest expenses, which increased to 62.6 billion euros (approximately 93 trillion won) this year, are projected to rise further to 72.9 billion euros (approximately 109 trillion won) next year. Meanwhile, the inflation rate jumped from 2.6% in August to 3.4% in September. Under these circumstances, austerity measures aimed at reducing fiscal deficits could provoke even greater backlash.

Amid continuing violent protests, the French government has imposed nighttime curfews in major cities including Paris, Lille, Nice, and Lyon.

74% of Income Earned Through Employment Vanishes Due to Slashed Benefits and Heavy Taxation
50 Million Individuals Aged 20–64 in the EU 'Simply Rest'… Average Social Protection Expenditure Reaches '20% of GDP'

According to statistics updated this year by the European Commission, out of 13.2 million people who lost their jobs in the EU in 2024, 3.46 million did not engage in job-seeking activities at all. This explains why the re-employment rate remained at a mere 36.9%. For the majority of the unemployed, this is a rational choice. Factoring in the loss of various benefits and the increase in taxes upon employment, new workers in the EU see 74.2% (as of 2025) of their earnings disappear. Rather than working for an additional income amounting to only about 25% compared to staying unemployed, it is better to spend the day entirely for oneself.

This is the current reality of the EU's social system, which is lenient toward the unemployed and harsh toward workers. For a long time, this dynamic has been eroding Europe's work ethic and growth rates, plunging various countries into inescapable crises.

◇ A System Favorable to the Unemployed in Europe

When an unemployed person in the EU secures a job, unemployment benefits as well as various living subsidies, such as housing support, are cut off. A substantial amount is deducted from employment income through taxes and social insurance premiums. This is the so-called 'unemployment trap.' This ratio reaches 90.7% in Luxembourg, 89.2% in Czechia, and 85.3% in Belgium. This means that when an unemployed person in Luxembourg takes a job, their real income increases by only 9% compared to when they were unemployed. France, currently mired in social turmoil, also stands slightly above the EU average at 75.1%.

Lower-income groups relying on higher levels of social security find it harder to escape the unemployment trap. In the EU, when a worker earning one-third of the average salary increases their income to two-thirds of the average, an average of 38.5% is deducted in taxes and social insurance contributions. In Belgium, this figure reaches as high as 59.2%. According to an analysis by the Organisation for Economic Co-operation and Development (OECD) last year, certain income brackets in Germany even experience a situation where the taxes and deductions taken away exceed their increased earned income. For example, if a worker in a household earning 1,000 euros a month increases their working hours by 50%, their citizen’s allowance and housing allowances—types of subsistence subsidies—are reduced. If they have children, child support is also cut. In contrast, taxes and social insurance contributions increase. This is why overall disposable income remains at a standstill even when working more. A structure is formed where rewards diminish both when starting a job and when working harder to increase income.

◇ Inducing Low-Wage and Part-Time Employment

France’s Research, Studies, and Statistics Directorate (DREES) published similar data in February of this year. A single tenant living in Paris received 883 euros per month while unemployed. When this individual secured a full-time job at the minimum wage, their monthly income totaled 1,670 euros, consisting of 1,426 euros in net-of-tax wages plus 244 euros in employment bonuses. The net increase in income for working full-time amounted to only 787 euros (approximately 1.17 million won).

As this phenomenon becomes widespread, an increasing number of low-income earners in EU nations are remaining stuck in low-wage, part-time jobs. Germany, evaluated as having a relatively stronger work ethic within the EU, is no exception. Last year in October, among employed individuals who qualified for living cost support, full-time workers numbered 76,000. In contrast, part-time workers numbered 248,000—more than three times that amount.

The proportion of the working-age population (aged 16–64) that does not participate in economic activities is also substantial: 14.5% in the Netherlands, 15.9% in Sweden, 17.7% in Denmark, and as high as 20.9% in the United Kingdom. The European Commission estimated the number of economically inactive individuals aged 20–64 at approximately 50 million. Long-term unemployed individuals who have failed to find work for over a year also reached 4 million.

As the burden of supporting the economically inactive population grows, fiscal pressure is mounting. According to updated Eurostat statistics for 2026, social protection expenditures by EU member governments in 2024 amounted to 3.54 trillion euros, accounting for 19.6% of GDP and 40.0% of total government spending. In other words, out of every 5 euros spent by the government, 2 euros were allocated to social protection. The European Commission pointed out that "due to labor market problems, the number of contributors to social protection burdens is shrinking, while productivity and innovation are being constrained."

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