Can France still escape its economic and social trap?

France has been trapped for far too long in a vicious circle combining high compulsory levies, a low employment rate, and an uncontrolled rise in public debt. In this article, after recalling why further tax increases cannot provide a sustainable solution, I argue for a coherent strategy based on raising the employment rate, bringing public spending under control, and pursuing a calm yet determined reform of the social model. Escaping the French trap is possible—provided we act with consistency, clarity, and a strong sense of responsibility.

Olivier Klein , published by Les Échos , on the 2nd of January, 2026

We know it — or rather, we should know it after so many years trapped in the vicious circle in which our country finds itself. France will not escape the circular chain of causality linking excessive compulsory levies, an employment rate that is too low, and an uncontrolled level of public debt through yet another increase in taxes and social contributions.

Stabilising the debt ratio instead requires a coherent strategy based on effective management of public spending, policies aimed at increasing our growth potential — including a higher employment rate — and a genuine approach to change management, so that all stakeholders understand and adhere to the path we must take to make our model sustainable once again.

Rethinking the rules of Social Security

The greatest margins lie at the very heart of the social model, starting with pensions, the largest item of public expenditure. Raising the average retirement age by one year, combined with greater convergence between public- and private-sector schemes and an active policy to promote senior employment, would make it possible, within a few years, to generate €10 to €15 billion per year (direct effects and those induced by stronger growth), without undermining retirees’ living standards.

It is also necessary to review the rules governing the use of the Social Security system in order to limit moral hazard: sick leave, the consumption of healthcare services and medicines must be organised so as to ensure responsible and solidarity-based use.

Rebalancing rights and duties, strengthening controls where necessary, but also encouraging virtuous behaviour — both in health and in the labour market — is a sine qua non for the sustainability of our social model.

At the same time, better management of public administrations — reorganisation with targeted non-replacement of departures, reduction of administrative overlaps, digitalisation, and redeployment towards frontline services — could yield around €20 billion per year, with a reduction in staff of about 5%, without any reduction in civil servants’ pay.

Several advanced economies have reduced their number of civil servants by 7% to 10% without triggering a slowdown in growth or a decline in the quality of public services.

Acting on expenditure — and employment

But a lasting exit from the French trap depends as much on employment as on expenditure control. A six-point increase in the employment rate, bringing France up to the German level, achieved — beyond raising the retirement age — through a coherent reform of unemployment insurance, the fight against inactivity traps, and a more effective system of vocational training, would generate nearly €60 billion in additional revenue under unchanged tax legislation. That represents a reduction of around 60% of the primary budget deficit.

An increase of roughly ten points in the active population — equivalent to the Dutch level — would even bring the primary deficit down to zero, following a logic of wealth creation rather than additional taxation, which would instead be regressive.

Still, these reforms — assuming they are voted into law — would have to be genuinely implemented. This requires an assertive approach to change management: a clear and intelligible national strategy, well-defined and understandable milestones, appropriate means to achieve them, and incentive systems aligned with the objectives pursued so as to secure the engagement of all.

By combining 1.5 to 2 percentage points of GDP in recurring savings with 1.5 to 2 percentage points of annual revenue linked to higher employment and growth, France could improve its public balance by 3 to 4 points of GDP within a few years. Enough to stabilise public debt — not through inevitable austerity, but through a calm and responsible reassertion of control over our economic and social model.

To procrastinate further — or worse, to move in the opposite direction of what reason and successful international experience teach us — would be to blindly drive the country ever deeper into a vicious circle that tightens day by day.

Olivier Klein
Professor of Economics, HEC