Broader European crisis? Violent riots collide with soaring national debt in France

France descended into chaos this past weekend, leaving many to question the nation's path forward. What began as a student movement over deteriorating school conditions quickly expanded into widespread anger over the rising cost of living, before escalating into violent riots across major cities. Immigration issues have also created a lot of social tensions, as well as public union support for the protesting, with fingers being pointed as soon as the rioting turned ugly.

The aftermath: When all was said and done, hundreds of police officers and firefighters were injured, thousands of people were arrested, and the damage was staggering, ranging from smashed and looted stores to toppled and burned landmarks. President Macron appealed for calm during a nationwide address and condemned the violence, but it wasn't clear what measures the government would take to bring it under control. The situation is even worse given a gridlocked National Assembly and a presidential election only six months away.

At the core of the crisis is severe fiscal strain, with the country running a massive deficit each year that's now about 120% of GDP. Amid stalling economic growth, groups are taking to the street to try and get a piece of the pie (remember the farmer, pension reform, and yellow vest protests?) The government already takes over half of the private resources coming out of the French economy to provide outsized entitlements and pensions, leaving not such great options for the path forward.

Mountain of debt: France has already seen the biggest jump in borrowing costs out of the G7 nations since the Iran war. The deteriorating situation hasn't been helped by the rival parties jostling for power, including France Unbowed's Jean-Luc Mélenchon, who has advocated for burning 18% of France's public debt, or National Rally's Marine Le Pen, who wants to reduce the retirement age from 62 to 60. French government bonds sold off again on Monday following the riots, while the benchmark CAC 40 Index (CAC:IND) slid 1.4% to lead declines across Europe.

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