Business

France has a massive debt crisis. So why is it spending billions a year subsidising business? | Alexander Hurst

Published

6 hours ago

September 2, 2025

As someone who has always been against austerity, I find France, with a national debt at 114% of GDP and a budget deficit of 5.8% of GDP, a conundrum. Despite years of denunciation from his left and far-right opponents that Macron has engaged in “ultraneoliberalism”, there hasn’t been any. Not on a macro level, anyway, where both French government spending (57.3% of GDP) and tax receipts (51.4% of GDP) are among the highest in the world, including social spending, which outpaces any of its European neighbours.

At the same time, it’s impossible to have spent the past decade in France without encountering the widely shared perception and accusation that public services are in decline. Doctors and nurses denounce a labour shortage in public hospitals; people who live in rural areas denounce the closing of rural train lines; students and academics denounce a lack of resources for public universities, many of which are dealing with outdated infrastructure, and for research.

Some of the responses to this aren’t strictly financial. Nearly every country in the world is dealing with a shortage of medical personnel, which in France has been exacerbated by caps on medical school admissions that were finally lifted in 2020. And over the past 25 years, France has seen an increase in urbanisation, from 76% to 82%. Maintaining the same level of transportation and other services to shrinking rural towns and villages would mean far higher spending per person than for those who live in cities, ultimately diverting resources from something (whatever, and wherever, that is) and raising a fundamental question of fairness. The French, for their part, see the downside to the concentration of policymaking in Paris and overwhelmingly want more decentralisation.

Nevertheless, somehow in a country that spends a greater percentage of its budget than any other on all of these areas combined, there’s not enough money for anyone, and most are – unlike their Nordic peers – to some extent, dissatisfied. And the debt and deficit, of course, spiral into unsustainable levels. What, then, is going on?

The far right blames immigration and promotes a spurious narrative that asylum seekers are to blame for the strain on social services and public resources. The centrist prime minister, François Bayrou, wants to nibble at the edges with cuts to everything, to find €44 billion a year in savings, culminating in the absurd proposal to do away with two public holidays (a self-destructive political act so outlandish that I originally, and wrongly, I guess, assumed it was only suggested to be sacrificed in figure negotiations). The left, for its part, somewhat more reasonably argues for taxing wealth, while in practice potentially extending the proposed tax increase even to people making over €20,584 a year and remaining unmoved by the legitimate complaint that self-employed workers, entrepreneurs, small business owners and startups are slammed by paperwork and the administrative costs of expanding.

In the midst of the disagreement over what to do about France’s finances – a debate that threatens to bring down the current French government when Bayrou holds a confidence vote on 8 September – almost nobody is having an honest conversation about the single largest component of the French government’s discretionary spending: the €211bn spent every year subsidising businesses to create jobs in a country where letting go of workers is difficult and costly, and where businesses are, as a result, hesitant to hire. France has created an unnecessarily rigid labour market (notice periods can reach up to two to three months), has ended up with an unemployment rate persistently higher than the EU average and salaries that are not progressing fast enough to keep anyone content, and spends €211bn (that is, more than on education) trying to compensate. If France instead pursued Danish-style “flexicurity”, how much of that €211bn might otherwise be split between cutting the deficit and boosting health, education and green energy infrastructure?

Let me get something on the record before I am inevitably misunderstood. Not every euro of this should be castigated: the French model of heavy state intervention in the economy is far from being misplaced. It’s one reason why, for all its problems, France maintains what may be Europe’s only “full spectrum” economy, from agriculture to AI. And if anything, it is proving to be more and more relevant as the order of the day; this has always been the way that China functioned, and it’s increasingly the way that the US is functioning.

Capitalism needs direction. As just one example, in undirected capitalism, we end up with a confounding situation where different geographies race to the bottom to draw investment in datacentres that are inevitably powered by new gas turbines and drain local water resources, rather than seeing regulation and incentives direct all of them to Iceland, where they could be powered by its more-than-sufficient geothermal energy (and the gains distributed).

In the deeply imperfect past, some of this “direction” was provided by internationally agreed rules and treaties, which allowed small states to be nimble and dynamic. This has given way to a new world where nations – or a club of nations – of sufficient size can be protectionist externally and thus allow for nimble dynamism and innovation within their own internal rules. France’s problem is thus one of scale. It, like every other European nation, is too small to provide such protective external walls – a task that must fall to the EU. At least, should European leaders finally accept that the old world they cling to is not coming back.

The EU cannot succeed in its current form in a world of power rather than rules, and where the US and China view geopolitics and economics holistically and don’t hesitate to throw their weight in one area behind their interests in another. The EU can, on the other hand, succeed if it adapts a classically French approach. It’s not just that France needs a wealth tax, it’s that the EU needs one; it’s not just that the French space agency needs more funding, it’s that the European Space Agency does; it’s not just that France should invest more in green energy, it’s that the EU as a whole needs energy independence through renewables.

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The irony is that Europe won’t be pushed in this direction unless France has the heft to nudge it there. And to do that, France needs an economy that is performing and a political class capable of having an honest and long-term conversation, rather than scapegoating, gimmicks, or same old, same old.

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Business

Gold price hits record high as investors seek safety

Published

53 minutes ago

September 2, 2025

Faarea Masud

The price of gold has hit a record high as demand for the precious metal remains strong amid global economic uncertainty.

The spot gold price hit $3,508.50 per ounce early on Tuesday, continuing its upwards trend which has seen it rise by nearly a third this year.

The precious metal is viewed as a safer asset for investors during times of economic uncertainty, and its price rose earlier this year after US President Donald Trump announced wide ranging tariffs which have upset global trade.

Analysts say the price has also been lifted by expectations that the US central bank will cut its key interest rate, making gold an even more attractive prospect for investors.

Adrian Ash, director of research at BullionVault, told the BBC’s Today programme that the rise in gold prices over the past few months is really down to Trump and “what he’s done to geopolitics [and] what he’s done to global trade”.

“It was really the US election last year that really put a fire under it,” he said.

Analysts also cite worries over the independence of the US central bank, the Federal Reserve, as another factor driving the gold price.

Trump has launched repeated attacks on the Federal Reserve’s chair, Jerome Powell, and recently attempted to fire one of its governors, Lisa Cook.

Derren Nathan from Hargreaves Lansdown said it was Trump’s “attempts to undermine the independence of the Federal Reserve Bank” that was “driving renewed interest in safe haven assets including gold”.

On Monday, the head of the European Central Bank Christine Lagarde warned that if Trump were to undermine the independence of the Fed, it would represent a “very serious danger” to the global economy.

She said if the Fed was forced to respond to Trump’s politics, it would have a “very worrying” impact on economic stability in the US, and therefore in the rest of the world as well.

Mr Ash added that when the price of gold surges because of investor interest, it was usually tempered by a slowdown in buying from China and India – two of the biggest markets for gold jewellery.

But this time, he said gold was continuing to find demand in China and India as, rather than exiting the market during times of high prices, jewellery buyers turn towards buying investment gold products such as bars or coins.

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Business

Trade, Energy, AI Dominate Kazakhstan–China Business Council

Published

2 hours ago

September 2, 2025

Fatima Kemelova

ASTANA — President Kassym-Jomart Tokayev described China as Kazakhstan’s destined neighbor, close friend, and long-term strategic partner during the Sept. 2 Eighth Meeting of the Kazakhstan–China Business Council in Beijing, Akorda press service reported.

Photo credit: Akorda

He noted that bilateral trade reached a record $44 billion last year, and emphasized the two countries’ intention to push this figure even higher over the next five years, backed by strong political will at the highest level. China has already invested $27 billion in Kazakhstan, with more than 6,000 Chinese-backed enterprises operating in the country, ranging from giants such as CNPC, Sinopec, CITIC, and Huawei to mid-sized businesses. Tokayev described his talks with President Xi Jinping as productive, voicing confidence in the partnership’s future.

He underlined Kazakhstan’s steady economic growth, with GDP expected to surpass $300 billion by year’s end. Reforms such as the National Digital Investment Platform, a new Investment Headquarters, and the recent bilateral investment protection agreement, coupled with a visa-free regime, have all strengthened the investment climate. Tokayev said Kazakhstan and China share vast untapped potential — and now is the time to unlock it.

Transport and logistics

Kazakhstan, as a close neighbor and reliable partner, fully supports and actively participates in President Xi Jinping’s Belt and Road Initiative, Tokayev said. The country accounts for 85% of all continental freight between China and Europe. The commissioning of the second track on the Dostyk–Mointy railway this year will increase the corridor’s transit capacity fivefold.

Meanwhile, freight volumes along the Trans-Caspian International Transport Route grew 62% last year to 4.5 million tons, with a target of 10 million tons in the near future. President Tokayev noted that shipments through Kazakhstan’s Caspian ports, specifically Aktau and Kuryk, are also growing steadily. Additionally, key joint infrastructure projects, such as the Kazakhstan–China logistics terminal in Lianyungang and the dry port in Xi’an, are already operational.

“For Chinese companies, Kazakhstan’s transit potential opens tremendous opportunities,” Tokayev said.

Energy and nuclear cooperation

Tokayev outlined major projects in the energy sector, including a $7.4 billion polyethylene plant in the Atyrau region with Sinopec and the planned modernization of the Shymkent oil refinery with CNPC. Renewable projects are also in focus, including initiatives with China Power International Holding and China Energy, as well as the construction of a 160 MW gas-steam power plant in Mangystau with China Huadian Corporation.

He added that Kazakhstan and China agreed to expand cooperation in the nuclear industry, involving Chinese technologies and specialist training. CNNC will play a central role, while SANY Corporation continues to expand its presence in Kazakhstan’s energy market. Tokayev emphasized that traditional energy sources remain crucial to Kazakhstan’s security, but joint projects across the sector will strengthen the mutually beneficial partnership.

Large-scale mining and metallurgical projects with Chinese firms are underway, including Fujian Hengwang Investment’s steel plant in Zhambyl region (three million tons annual capacity) and Jiaxin International’s tungsten ore processing project in Almaty region.

In construction and manufacturing, Tokayev cited China Glass’s new glass plant, a forthcoming multi-brand auto plant in Almaty with a capacity of 120,000 vehicles annually, producing GWM, Chery, and Changan models, and a new BYD electric bus plant in the same city.

“These projects diversify Kazakhstan’s economy and expand its export-oriented base. These are only a few examples,” he said.

Adding momentum, Tokayev and Chinese Vice Premier Ding Xuexiang jointly inaugurated Kazakhstan’s first wind energy components plant in the Zhambyl region via videoconference. The facility, built through a partnership between Samruk-Kazyna and SANY Renewable Energy, will produce gondolas, hubs, towers, and other key components for wind farms, boosting Kazakhstan’s green energy capacity. Located in the Silk Road Special Economic Zone in Shu, it will play a vital role in expanding renewable energy across the country.

Agriculture and digital economy

Tokayev reminded that Kazakhstan is the world’s sixth-largest holder of arable land and a top-ten grain exporter, supplying over 10 million tons of wheat and 2 million tons of flour annually. He said Kazakhstan can supply up to 2 million tons of grain each year to China. Beyond exports, Kazakhstan seeks to develop joint processing industries, highlighting Dalian Group’s deep grain processing plant in Akmola region and Fufeng Group’s corn-processing project in Zhambyl region, aimed at exports to China and Europe. He also invited Chinese partners to cooperate in producing organic and high-quality livestock products.

On digitalization, Tokayev praised China’s global achievements in the field and cited forecasts that the AI market could reach $5 trillion by 2033, accounting for 30% of the global tech industry. He mentioned that at the Shanghai Cooperation Organization summit in Tianjin, he supported China’s initiative to establish a Global Organization for AI Cooperation. Kazakhstan, he added, is systematically developing its digital economy, having launched Central Asia’s first supercomputer and the Alem.AI International AI Center this year. The construction of Alatau City, envisioned as a hub for innovation, crypto, and tech entrepreneurship, is underway and will soon receive special ecosystem status.

Finance and investment

Tokayev also called for deepening cooperation in finance, noting that the Astana International Financial Centre now hosts over 4,200 companies from dozens of countries, including 850 from China. In partnership with leading Chinese banks, the Development Bank of Kazakhstan recently issued its debut eurobonds in Chinese yuan (Dim Sum bonds), a first for Central Asia, which strengthened international investor confidence in Kazakhstan’s financial system.

Tokayev emphasized that Kazakhstan has created the most favorable conditions for large-scale investments and ambitious projects. He assured Chinese business leaders that they will find reliable partners and unique opportunities in Kazakhstan.

“I am confident that the agreements reached today will boost economic interaction and give new momentum to our strategic partnership. These goals fully align with Kazakhstan’s national interests, which is why their implementation will remain under close attention of the top leadership,” he said.

The Kazakhstan–China Business Council concluded with the signing of over 70 commercial documents worth $15 billion.

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