France on Monday saw S\u00e9bastien Lecornu leave as prime minister<\/a> \u2013 the fourth in less than a year \u2013 over the country\u2019s contentious budget. The shocking development came just hours after Lecornu had unveiled members of the French government including Roland Lescure, an ally of President Emmanuel Macron, as finance and economy minister.<\/p>\n Lecornu was tapped by Macron to follow Fran\u00e7ois Bayrou, who in turn succeeded Michel Barnier. Both Bayrou and Barnier were toppled by parliament while attempting to pass an unpopular austerity budget.<\/p>\n France, which is the European Union\u2019s second-largest economy, has a total debt of $6.5 trillion (Rs 5771.05 lakh crore). Its debt-to-GDP ratio is at 113.11 per cent, according to the International Monetary Fund. Spending continues to be a problem for France. Last year, its budget deficit was at $196 billion (Rs 173.97 lakh crore) \u2013 around 5.8 per cent of its gross domestic product (GDP). European agencies, meanwhile, want to keep that figure to around three per cent.<\/p>\n Fitch in September downgraded the country\u2019s credit rating, saying its debt ratio \u201cwill continue to rise.\u201d Bayrou\u2019s government fell after plans to cut $51 billion (Rs 45.27 lakh crore) in public spending could not pass the fractured parliament. France\u2019s inflation rate in September touched 1.20 per cent.<\/p>\n Unions have continued to reject cuts on social programmes,<\/a> claiming French workers have been deeply affected by inflation in recent years. They also continue to protest against Macron\u2019s pension reform that increased the minimum retirement age from 62 to 64. Thousands of people took to the streets of France last month in the \u2018Block Everything\u2019 protests. Meanwhile, the far-left are pushing a tax on the super-rich, known as the \u2018Zucman tax\u2019, that some economists estimate will bring in billions.<\/p>\n STORY CONTINUES BELOW THIS AD<\/p>\n Now, Lecornu has resigned claiming that the job is impossible given the divisions in parliament between the left, centre and far-right \u2014 with none of them seemingly willing to cooperate with the other.<\/p>\n Macron, who shocked many in France by calling snap polls in June 2024, has vowed to serve out the rest of his term till 2027. However, Macron, whom many people derisively call the \u2018president of the rich\u2019, himself may be running out of room to manoeuvre.<\/p>\n Japan<\/strong><\/p>\n Japan, which got its first woman prime minister, is set to ramp up spending<\/a>. Tokyo reportedly is planning to spend $831 billion (Rs 737.63 lakh crore) on welfare programmes and infrastructure next fiscal in hopes of spurring growth. This even though Tokyo\u2019s total debt is at $11.1 trillion (Rs 9863.35 lakh crore) \u2013 currently 250 per cent of its GDP \u2013 much of it driven by government spending.<\/p>\n This comes as Japan faces an ageing and shrinking population as a result of one of the world\u2019s lowest birth rates and its economy remains sluggish. Inflation, meanwhile, is at 3.1 per cent this year \u2013 far above the Bank of Japan\u2019s 2 per cent target. The previous prime minister Shigeru Ishiba had warned that the \u201ccountry\u2019s fiscal situation is undoubtedly extremely poor,\u201d and, \u201cworse than Greece\u2019s.\u201d<\/p>\n Ishiba, who lost the July elections after his Liberal Democratic Party performed poorly, resigned. He has now been succeeded by Sanae Takaichi. STORY CONTINUES BELOW THIS AD \u201cJapan is much closer to a debt crisis than people think,\u201d economist Robin Brooks at the Brookings Institution told Asia Times. He added that the debt has left Japan in a difficult spot. If the Bank of Japan continues to keep interest rates low that could depreciate the yen \u2013 which in turn could spike inflation.<\/p>\n However, if it raises interest rates, this could further threaten Japan\u2019s debt sustainability. \u201cThis Catch-22,\u201d he says, \u201cmeans a debt crisis is much closer than people think.\u201d Brooks says the path forward is simple \u2013 Japan must either cut spending or raise taxes.<\/p>\nMasked protesters hold a pirate flag, made to resemble the Straw Hat Pirates\u2019 Jolly Roger flag from the series One Piece, during a demonstration in Paris as part of a day of nationwide strikes and protests against the government and cuts in the next budget. Reuters<\/b><\/p>\n
Japan and France are also among the nations that could face fiscal trouble from the \u201cbond vigilantes\u201d \u2013 referring to investors who sell off bonds of countries whose finances they deem unsustainable.<\/p>\nJapan\u2019s total debt is currently 250 per cent of its GDP. Reuters<\/b>Tokyo, in fact, found it difficult to find people to bid on its government bonds earlier this year.<\/a><\/p>\n