France: The Price of Inaction

The debate over sovereign debt can no longer ignore this simple truth: that a debt is sustainable only in an economy capable of growing and modernizing. Nothing is more credible than a country that invests to avoid decline. Moreover, privileging the quality of spending rather than being eternally fixated on numerical targets makes it possible to revive the economy while preserving the sustainability of public debt. Indeed, the choice is not between austerity and laxity, but between two budgetary paths.

An economy that is not transformed is one that falls behind, that loses its productive base and its capacity to create wealth. The effect on tax revenues is mechanical, and therefore affects the ability to honor public debt. All other things being equal, a lasting contraction of GDP leads in turn to an equivalent contraction in public revenues. A country can formally comply with budgetary rules while seeing its debt become unsustainable, because its economy stagnates or declines. In this light, it becomes urgent to revise our mindset, because a high level of debt is not problematic in itself provided it serves productive investment. It is not the figure that matters, but how the money is used, because it is imperative—and even vital—to invest to modernize, to protect, and to strengthen the economy, instead of merely reducing ratios at the cost of irreversible weakening.

Our choice in France is not between austerity and laxity, but between strategic investment and certain decline. It is not debt that threatens our future, but our inability to finance our collective transformation. Restoring public action with the means to fulfill its role—including, and above all, through tools currently dismissed on principle—is a strategic necessity, because a high debt can be sustainable in a strong economy. The reverse is not true. Our country must invest massively in two crucial objectives, equally important: restoring competitiveness and preserving sovereignty. Estimated at around 100 billion euros per year, these needs exceed the capacity of traditional public financing, which is constrained by European rules and already very high public debt.

Yet, an untapped resource remains: the 2 trillion euros locked in life insurance contracts, of which 1.4 trillion are in low-yield euro funds. This unproductive investment offers savers a real return close to zero (about 2 percent against 2 percent inflation in 2024), mostly invested in government, corporate, or market instruments. This savings should be able to finance national strategic projects over 10 to 15 years. Unlike regulated savings accounts or bank deposits, life insurance is a long-term investment, whose holders accept and have already factored in relative illiquidity.

A mandatory national loan, targeting 5 percent of life insurance assets each year for 5 years, would gradually mobilize a significant share of this long-term savings, that is 25 percent of the assets in total, or around 500 billion euros. This staged mobilization—around 100 billion euros per year—would ensure a smooth transition, without jolting the markets or savers, while financing projects essential to modernization and national sovereignty.

Issued with an attractive yield of 4 percent per year, guaranteed by the State, and absolutely not comparable to a new tax or a levy on income, this loan would temporarily redirect a limited portion of long-term savings without affecting household liquidity. Its terms would guarantee fairness and security, with clauses allowing withdrawals in the event of death or the purchase of a primary residence. A fund supervised by a committee of professionals, selected from the private and public sectors, would ensure the allocation of funds to strategic projects.

As the urgency requires unconventional solutions, voluntary mobilization is too slow and uncertain in a context where time works against the public interest, and national solidarity implies the effort must be fairly shared, without direct seizure of income, without new taxes, and without breaking savings contracts. A temporary and mandatory reallocation of a limited percentage of these contracts is therefore necessary.

Repayment of this mandatory national loan will rely first on the catalytic effect of the investments carried out. By financing critical infrastructure, industrial modernization, digital technology, artificial intelligence, and defense, these projects will generate sustainable economic growth. This dynamic will result in a significant increase in tax revenues—corporate taxes, VAT, income tax—which will ultimately repay the loan without increased pressure on public accounts.

Moreover, to strengthen the security of subscribers, part of the economic returns will be allocated to the creation of a dedicated reserve, a financial cushion that ensures early repayment and builds saver confidence and system stability.

Finally, an innovative measure will complete these guarantees: in exchange for the mobilization of 25 percent of the loaned amounts, the State will transfer to life insurance contracts a minority share of stocks or securities from the financed companies. These securities will have a guaranteed minimum resale price, offering savers a double safeguard—a guaranteed financial return through bond coupons and potential asset appreciation tied to the performance of the underlying assets. This hybrid approach will enhance the appeal of the scheme while aligning private investor interests with the economic success of the strategic projects funded.

France has shown in the past its ability to mobilize its population to meet historical challenges. What is at stake today is not simply our budgetary balance, but our economic sovereignty, the resilience of our social model, and our country’s ability to remain master of its destiny. Mobilizing 5 percent per year of life insurance assets is neither a confiscation nor a blind coercive measure. It is an act of reason, of justice, and of general interest. To refuse this solution today is to accept our country’s external dependency, which is far more costly on every level.