Protesters on Europe’s streets this fall aren’t the only ones calling out an untenable economic situation. In recent years, factions of the European Union’s technocratic elite have issued increasingly dire warnings over the bloc’s bind and the policy inertia aggravating it all. In September 2024, former Italian Premier Mario Draghi authored an influential report on the EU economy, warning of the continent’s “slow agony” as investment droughts in infrastructure, green technology and public services combine with low wages to feed into a protracted economic malaise.

That prognosis is playing out in part in the anger erupting this autumn, with the eurozone’s GDP growth expected to level out between 0.8 and 1 percent in 2026, according to the Organisation for Economic Co-operation and Development. Since 2019, according to Le Monde, real wages in France have in fact declined, with 21.7 percent in cumulative inflation more than gobbling up the 18.7 average increase in salaries.

Even in the face of entwined crises like these, EU policymaking has a remarkable capacity to trudge on as if by inertia. Little seems able to fundamentally shake the course of low investments and minimal economic interventionism from Brussels.

Hopes for flexibility were again doused in the mid-October meeting of the European Council, bringing together heads of state and government from the twenty-seven-nation body. German Chancellor Friedrich Merz and his alliance of fiscally conservative Northern European states are demanding “several hundred billion euros” worth of cuts for the bloc’s next budget, set to cover the 2028–34 period. The goal is to reach a deal before the cycle of elections next year in important European member states like France, Italy, and Poland.

This is not a new position. For decades, EU economic policy has been a tug-of-war between advocates of greater economic federalism and fiscal hawks arguing for conservative retrenchment, a dispute largely carried by the latter. Hovering at around 1 percent of the European Union’s annual GDP, the minimal budget afforded to Brussels is already a victory for the bloc’s dominant conservative members. Facing his own domestic pressure amid the rise of the far-right Alternative für Deutschland (AfD) party, Merz wants to scale down appropriations for EU agricultural subsidies and cohesion grants, clearing up resources for things like rearmament.

Germany’s stonewalling, despite mounting evidence of European stagnation, is shocking even some liberals.

“It’s difficult to insist on the need for more Europe when it comes to defense and innovation and then push to cut an already woefully low and insufficient budget,” said Sandro Gozi, a MEP and leader of Macron’s Renew Group in the European Parliament. “Merz fashions himself an EU leader but is playing a very dangerous game in the current situation,” Gozi wrote to Jacobin.

No doubt, a lot separates these budgetary wranglings in Brussels from what’s playing out on the streets in European cities. But it’s not hard to deduce from Germany’s position how it would react to a runaway fiscal crisis in a member state like France, a scenario that has come to preoccupy policymakers in EU institutions.

For that matter, France’s protests are indeed a salvo in the escalating confrontation over budgeting. The cost of serving French debt this year is estimated to exceed the education ministry’s operating budget. French government bond rates hit 5 percent in the week following the October 17 marches, which brought large crowds out to the streets in cities and devolved into heated rioting in some cases.

“The situation in France is an image of our future,” said one adviser close to Enrico Letta, a former Italian premier who like Draghi also issued an influential 2024 report on Europe’s economy. “Fiscal politics are becoming extremely difficult to navigate, weak majorities struggle to pass budgets, investment needs are very high, people are unhappy, and markets are pricing it all in by raising interest rates.”

Meanwhile, French Prime Minister Sébastien Lecornu is struggling to stitch together a majority for a cost-cutting 2027 budget, seeking tens of billions of euros worth of savings in a bid to steady the deficit at around 5 percent of GDP next year. But the ongoing demonstrations are increasing pressure on the majority-opposition parties in parliament to not extend the government a hand.

Many in France are arguing that the solution to the fiscal crisis requires a new economic deal in Europe. La France Insoumise, the left-wing party led by four-time presidential candidate Jean-Luc Mélenchon, has argued for freezing state debt owned by the Bank of France, a subsidiary of the European Central Bank (ECB).

There’s not an off chance that France’s next president will have been elected on a program of confronting the existing EU setup. For the April 18 first round of the presidential elections, Mélenchon is currently polling a distant second to Marine Le Pen, candidate of the Rassemblement National.

The leader of the far-right party recently told the Financial Times that she was prepared for a “trial of strength” with the EU on France’s contribution to the EU budget, an appropriation that La France Insoumise has also threatened to cut by 10 percent. Though Le Pen has come out in favor of installing a constitutional “debt brake,” in addition to pledging steep spending cuts if elected, she has also called on the ECB to intervene to ease interest rates.

Whoever wins, the lines are being drawn for a significant showdown on France’s fiscal situation. To judge by the tenor of the last few weeks, EU leaders should be wary of where the situation could turn if the French are pushed too far.