France, Germany and the United States are experiencing a budget crisis. What does this mean?

Another wave of protests against President Emmanuel Macron's fiscal policy is scheduled for October 2 in France. The rallies were sparked by French concerns about the authorities' upcoming plans to cut costs and their potential impact on social programs. At the same time, debts are growing not only in France. What the budgetary problems of the world's leading economies can lead to is in the Izvestia article.

Which countries have a crisis?

• Large-scale protests and strikes took place in France in September, and a new wave of actions was promised in October (we wrote about the political problems in the country here).The budget deficit has exceeded 5% of GDP, and the national debt is growing rapidly. In order to reduce the deficit to the EU norm of 3%, the authorities will have to tighten spending, which will once again cause public protests and alarm the markets.

• Debt difficulties have also affected Germany: in the summer, they adopted a budget that assumes a rapid increase in borrowing due to a sharp increase in military spending. The army's priority reduces the resources of the civilian sector, which provides jobs and tax revenues, which in the long term threatens to drop revenues and reduce production. As a result, the redistribution of funds from social programs to the military sphere can undermine the usual stability and cause discontent among the population (we wrote about this in more detail here). The increased debt burden weakens the country's financial flexibility and calls into question its reputation as a reliable locomotive of the eurozone.

• There are problems overseas as well. In the spring of 2025, the United States lost its top credit rating for the first time in a century due to rising debt servicing costs and chronic deficits, which signaled a possible increase in borrowing costs and an impact on global financial markets, where American bonds serve as a benchmark for reliability. In the summer of 2025, the US budget deficit increased by 19% compared to last year, reaching $291 billion.

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How are global markets reacting?

• Investors have already begun to question the reliability of French and German bonds, demanding higher interest rates and thus raising borrowing costs. This increases the burden on the budget of these countries and limits investment opportunities. In France, about €67 billion is spent each year on interest payments alone, effectively squeezing funds out of social programs. Given Paris' role as the eurozone's second economy, the deterioration of its financial situation undermines confidence in the euro and poses a threat to the stability of the entire monetary union.

• The same applies to Germany. The loss of the impeccable status of the main economy of the EU automatically affects the union as a whole, pushing up the cost of borrowing for other states of the union.

• In the United States, a growing budget deficit may weaken the dollar's position: investors have begun to redistribute funds into alternative assets, causing exchange rate fluctuations that affect global trade, commodity prices, and the debt burden of countries with obligations in dollars. In addition, Washington is currently experiencing a shutdown because Congress did not approve the budget before the deadline (you can read more about the causes and consequences here). The accelerated growth of the deficit may change the structure of central banks' reserves, reduce liquidity and increase the cost of financing international projects.

Why are there problems?

• Budget problems in France have arisen due to high government spending and limited opportunities to reduce it without social disruption. The government continued to support major defense programs, while trying to reduce domestic spending, which caused public discontent and protests (we wrote here that the EU's military plans were unlikely to come true).Limited opportunities to reduce costs have created a vicious circle. The growing deficit increased investor caution, raised borrowing costs and made it more difficult to stabilize the country's financial system, while declining confidence in French bonds caused capital outflows and increased pressure on the economy.

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• In Germany, budgetary difficulties are also associated with the adoption of a spending plan that involves a significant increase in military financing, which will reduce investment in the civilian sector, creating more jobs and tax revenues. Such a redistribution of resources will lead to an increase in the debt burden and an increase in debt servicing costs.

• The problems in the United States have resulted from a steady increase in budget deficits and increased debt servicing costs. This increased the fluctuations of the dollar on world markets and further increased the debt burden of countries with obligations in the US currency.

What does this mean?

• The higher the external debts of the state and the distrust of investors towards it, the greater the need to place this burden on the shoulders of the population. Countries have several ways to do this. This may be a "reduction in domestic spending", as in France, that is, fewer benefits, fewer payments to residents, less financing of the social sphere. This may be an attempt to make money on imports, as in the United States, which imposes high import duties on goods.

• In the coming years, developed countries will have to find a balance between meeting budget commitments and maintaining growth rates. France and Germany are likely to focus on deficit reduction without cutting key spending, which will require a combination of strict discipline and stimulus measures. At the same time, in the United States, where the debt burden is likely to continue to increase amid the unpredictable policies of Donald Trump, the consequences will be felt through fluctuations in interest rates and the redistribution of capital.

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Germany and other EU countries have already begun to tighten their approaches to payments.

• Debt management will become particularly difficult for countries closely linked to the dollar and the eurozone. At the same time, the weakening of economic policy coordination between the largest players can increase risks for the international banking sector and make the global economy more vulnerable to new crises.

When writing the material, Izvestia interviewed:

• Vasily Koltashov, an economist and head of the Center for Political Economy Studies;
• Doctor of Economics, Professor of the Financial University Alexander Safonov.