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French students are protesting over overcrowded classrooms and missing teachers while their government commits billions more to defence. Behind the confrontations lies a dispute about debt, austerity and whose future Europe is prepared to finance.
Outside the Hélène Boucher lycée in Paris on Thursday morning, students dragged rubbish bins into barricades and police responded with tear gas. The confrontation followed weeks of protests over the condition of French schools. Young people demanding an education were meeting the state through its riot police.
The grievances are concrete: overcrowded classrooms, deteriorating buildings, absent teachers who are not replaced. Education unions backing the movement describe conditions that obstruct learning before pupils even reach an examination. These complaints have spread beyond the poorer suburbs where the protests began, drawing teachers and parents into the streets.
Violence has accompanied the demonstrations. Schools have been damaged; police officers and students have been injured. The interior minister reported more than 6,600 arrests by 7 October. A teenager’s loss of a hand prompted the suspension of police stun grenades at school protests. None of this makes the destruction of schools defensible. Nor does that destruction dispose of the grievances that brought pupils out.
For a government under pressure to reduce borrowing, demands for more teachers and better buildings arrive as another unwelcome expense. For the students, the problem looks different. France is preparing a substantial military expansion while asking its public services to live within increasingly contested limits.
That contrast runs through a recent discussion between the economists Yanis Varoufakis and Wolfgang Münchau on The Econoclasts. They disagree sharply about how France should manage its debts. Their shared concern is that Europe is allowing fiscal restraint and military ambition to narrow the future it offers its citizens.
There is no evidence that the student movement as a whole shares their economic programme or their views on Russia. But their argument helps explain the political setting in which a dispute about classrooms has become a national crisis.
The cost that does not appear in the accounts
France’s debt reached almost €3.6 trillion at the end of June, equivalent to 119 per cent of annual economic output, according to INSEE. Debt on that scale does not make bankruptcy inevitable. It does make the relationship between growth, taxation and borrowing costs increasingly consequential.
As old bonds mature, the government must repay them or issue replacements. When replacement borrowing costs more, interest consumes a larger share of revenue. Ministers then face pressure to raise taxes or restrain spending, even before deciding what new investment the country needs.
The government’s defence is straightforward: an uncontrolled deficit eventually threatens the services that borrowing sustains. A state cannot promise ever more expenditure while assuming that lenders will indefinitely accept its terms.
But spending cuts carry risks of their own. Delaying repairs can make buildings more expensive to maintain. Weakening education can damage future productivity. Cutting investment during stagnation can depress demand and tax receipts, leaving the debt burden harder to manage. The apparent saving in one budget can become a cost in another.
Varoufakis places this conflict at the centre of his argument. He sees austerity as a distribution of power: creditors retain enforceable claims, while people dependent on public provision must repeatedly renegotiate what they receive. He describes it as class conflict conducted through economic policy.
That is an interpretation, not an established explanation for every French budget decision. Bondholders include pension funds and institutions investing ordinary people’s savings. Yet the imbalance he identifies matters. A missed debt payment registers immediately in financial markets. Years of inadequate schooling impose losses that are dispersed, delayed and much easier for a government to leave uncounted.
A debt with no repayment date
Jean-Luc Mélenchon proposes relieving some of the pressure by changing the treatment of government debt held by the central bank.
Under quantitative easing, the Banque de France bought government bonds from investors. The investors were paid; the bonds remained obligations of the French state, now held within the central banking system. Mélenchon’s question is why the government should have to raise fresh money to repay this portion of its debt.
His proposed answer is to convert it into perpetual bonds, with no repayment date and no interest. Varoufakis favours a small annual interest payment, suggesting one per cent. He advanced a similar approach while serving as Greece’s finance minister in 2015.
The attraction is easy to understand. Removing scheduled repayments could reduce the Treasury’s need to refinance debt in the markets. Varoufakis wants that breathing space directed towards investment, helping Europe rebuild its productive capacity.
The sums require care. The discussion uses approximately €600 billion, but the Banque de France reported €488 billion of public debt holdings under its two principal purchase programmes at the end of June. More fundamentally, converting bonds would not hand the government that amount to spend. These are obligations maturing over time, not a single bill payable tomorrow.
Central bank accounting also complicates the promise of relief. Bond purchases created money held as bank reserves; much of that money can earn interest within the monetary system. Removing income from the bonds does not automatically remove those costs. Some apparent Treasury savings could therefore reappear as central bank losses or lower future payments to the state.
A serious proposal must calculate the combined effect, including any change in market borrowing costs. Preserving a bond’s face value while drastically reducing its payments can still impose a substantial economic loss on its holder.
The limits imposed by the euro
Münchau’s principal objection is that France cannot simply order this rearrangement within the eurozone. The Banque de France belongs to a shared monetary system whose rules constrain government financing. Article 123 prohibits direct central bank credit to governments and direct purchases of their debt. Converting existing holdings into permanent, cheap financing would encounter formidable legal and institutional resistance.
Varoufakis believes a coordinated European agreement could overcome the opposition. His confidence that judges would accept the political decision goes further than the evidence warrants. Political support does not, by itself, settle a treaty question.
Nor can the response of private investors be assumed away. Their bonds might remain untouched, but they could interpret the conversion as evidence of wider institutional conflict and demand higher returns. The resulting increase in borrowing costs could undermine the relief France hoped to obtain.
This is the strongest part of Münchau’s case. A policy can have a defensible economic purpose and still fail because the institutions needed to implement it will not cooperate. Greece’s experience gives Varoufakis reason to challenge those institutions; it also gives his critics reason to doubt that confrontation will deliver the promised investment.
Even so, rejecting the proposal leaves Europe with the underlying problem. France needs stronger growth, functioning services and credible finances simultaneously. Simply insisting on repayment does not explain how it should achieve them.
The money for rearmament
Rearmament adds another claim on the same resources. France’s updated military programming law demonstrates the government’s willingness to mobilise resources rapidly when it judges a purpose sufficiently urgent.
Russia’s invasion of Ukraine supplies a serious argument for improving European defence. Governments must consider how to deter aggression and protect their populations. Military production also supports employment and can generate useful technology.
Those arguments establish a case for defence expenditure, not an exemption from scrutiny. Governments still need to explain which capabilities they require, what threats those capabilities address, how they will be financed and what other commitments will be postponed.
Varoufakis fears that weapons production is becoming Europe’s substitute for a broader industrial strategy. His formulation is sweeping, but it poses a legitimate question. Public orders can sustain a factory; the benefits of those orders depend on what the factory produces and what society otherwise lacks.
Investment in schools, energy systems, transport and civilian technology also builds national resilience. Neglecting those foundations can leave a country more vulnerable even as its military budget grows.
Security for whose future?
Münchau’s warning concerns the strategic direction of this spending. He describes Europe as entering a “pre-war era”, in which military preparations, hostile rhetoric and disputed incidents reinforce one another. The comparison with 1914 is a warning about miscalculation, not a prediction that history must repeat itself.
His argument does not require accepting every assertion in the discussion. Russia’s ability to threaten Europe cannot be measured solely by its difficulties on the Ukrainian battlefield. Nor is it sound to dismiss British and French nuclear forces because Russia possesses a larger arsenal. Nuclear deterrence concerns the capacity to inflict unacceptable damage, not merely a comparison of totals.
The stronger argument is that deterrence needs diplomacy alongside it. Allegations of sabotage require evidence and proportionate responses. Maintaining channels with Moscow allows governments to communicate limits, test intentions and reduce the risk that an incident produces an escalation nobody intended.
Negotiations would also have to include Ukraine’s security and agency. A settlement imposed over Ukrainian objections would carry its own dangers. Recognising Russia’s responsibility for the invasion, however, does not oblige Europe to treat diplomacy as weakness or every military commitment as beyond debate.
The fiscal and strategic arguments meet in the question of consent. How much additional expenditure are Europeans being asked to support, for what achievable objective, and at whose expense?
French students have brought a related question into the streets. They are being educated for a future whose basic provision already seems uncertain. A government asking them to accept constraint owes them more than the assertion that the financial position is difficult.
There are choices about taxation, the protection of investment, the distribution of spending cuts and the pace of military expansion. None eliminates scarcity. Each determines who experiences it.
France cannot repair its schools by pretending its debts do not exist. It cannot restore trust by treating creditors’ confidence as the only measure of responsible government, either. A pupil’s lost education is an obligation carried into the future, even if it never appears in the Treasury’s accounts.
The government has committed itself to finding billions more for national defence. It now has to explain, to the children outside its schools, how their future fits into that definition of security.