The protests in France, which began last month as student demonstrations over underinvestment in education, have expanded into a broader revolt against the high cost of living. Inflation accelerated to 3.4% in September, the fastest pace since January 2024, up from 2.6% in August. The government has lowered its 2026 growth forecast to 0.5% from 0.7%, while unemployment sits above 8% and youth unemployment reaches 20%. Negotiated wage increases have remained flat at around 1.7%.
The economic malaise has spooked financial markets. French bond yields climbed to their highest level in 24 years, echoing the eurozone debt crisis of 2011. The front-runners in the upcoming French presidential election come from the populist far right and far left, heightening investor uncertainty about fiscal prudence. Mujtaba Rahman of Eurasia Group described a triple crisis in France: “a crisis of liberal democracy, a crisis of fiscal mismanagement, and a crisis of youth disaffection. But the fiscal crisis is the most dangerous, underlying many of the country’s woes and threatening to bring it to ruin.”
In contrast, the US economy has shown stronger resilience. GDP rose 2.2% in the second quarter, with third-quarter growth expected to reach 3.6%. The jobless rate is 4.2% and youth unemployment is about 10%. Wages have grown around 3.9% annually, partly offsetting the 3.7% annual inflation. Corporate earnings remain strong and stocks near record highs. US bond yields have also climbed above 5%, but that partly reflects faster GDP growth. The Federal Reserve has hiked rates and may raise them further.
Market veteran Ed Yardeni argued the US 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.” He added that strong demand for capital and weaker growth in national saving have pushed the neutral interest rate higher, explaining why higher rates have not slowed growth.
The contrast between the two countries highlights how the US dollar’s reserve status and the AI-led investment surge provide buffers that France lacks. Affordability has become the main issue in the US midterm elections, while France faces a deeper set of interrelated crises.