'Doom Loop' Threatens France as Populism Confronts Markets

France is facing a “doom loop” risk as unrest and political constraints collide with investor pressure on sovereign debt. After protests over high gas prices in 2018, President Emmanuel Macron offered about $11 billion in tax cuts and wage increases to calm the streets. Now, following violent protests over education, he has less room to deploy spending. Investors are already dumping French bonds amid high interest rates and political uncertainty, and any large fiscal commitment could further raise borrowing costs. Macron, nearing the end of his term and leading a centrist government without a governing majority, faces a bind: inaction or more spending could both strengthen populists ahead of next year’s election.