What’s Wrong with France, and Is It Contagious?

Plus: Elon Musk Has Had A Very Busy Week

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Cheddar's Big Business This Week
October 22, 2026

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France is grappling with mounting public debt, street demonstrations and riots, and political deadlock. Can these problems infect America, or is this an idiosyncratic French issue? To unpack what is unfolding in Paris, BBTW’sPeter Green spoke with Nicolas Véron, senior fellow at the Peterson Institute for International Economics (PIIE) in Washington.

Looking at the fiscal strains and social unrest in France today, are we facing a potential repeat of the 2010s eurozone crisis, or is there a genuine contagion risk?

I don’t see the current situation as generating a risk of a repeat of the eurozone [crisis] of the 2010s, and the reason for that is that I think France is at this point clearly lagging behind other EU countries in terms of reform and especially reform of things like the pension system. Basically, adjustment to aging, and that’s a significant part of the fiscal stress. Pension reform is never easy, but it’s been particularly difficult in France for reasons that seem to make France more the exception than the rule, at least in an EU context. I don't see [it] plausible that it would deteriorate into a situation of actual financial [distress], by which I mean essentially any form of external financial assistance, let alone debt restructuring. As long as we are talking about fiscal adjustment, consolidation, maybe austerity, but not external financial assistance or debt restructuring, I don’t see a contagion dynamic. Cross-border contagion either within Europe or outside of Europe—I think this is a French situation.

How did France’s fiscal situation diverge so dramatically from its peers in Europe?

France has had very little fiscal discipline for at least 20 years. Divergence with Germany, of course, is particularly striking because France and Germany had really very comparable fiscal trajectories, and particularly public debt, until 2008. Then there was this very striking divergence, where Germany was by and large fiscally disciplined—some would say overly so—and France was not. Germany has always viewed itself as a fiscal anchor of the European Union, and has applied to itself a lot of fiscal discipline. Then you have the so-called periphery countries like Italy, Spain, Portugal, Greece, which actually have been subject to market discipline. So you could say Germany has had self-discipline, the periphery has had market discipline, and France has been in that intermediate territory.

Why was France able to avoid market discipline for so long?

My hunch is that it has something to do with the position of France in the European Union. France has felt itself to be too big to fail, which is one of the possible triggers of moral hazard. It was not really the anchor, so not the self-discipline of Germany, not the market discipline of the periphery, because there was a perception—and indeed that was to an extent the case in the previous crisis of the early 90s—that France would be somehow held, maybe even rescued by Germany if there was a really big problem. Therefore there has been this drift, and I think we are at the moment of reckoning of that sequence right now.

Structurally, what is driving the fiscal strain around pensions? How does the French system differ from models like the U.S.?

France has a fairly generous pension system, and to keep it sustainable, you have to keep it in line with demographic trends. Other countries have reformed their pension system to adapt them to those changing demographics, and France has done a little bit, but not nearly enough. It’s mostly about raising the employment rate. France makes, especially companies, pay quite a lot into the pension system, but the replacement rate tends to be high, and most importantly, the retirement age tends to be low. Compared with the U.S., the private pension element is almost non-existent. [401(k)s and IRAs] don’t exist.

Beyond pensions, we’ve seen riots and street protests. Critics point to underfunded public services, but are energy price shocks or inflation also driving this unrest?

My impression is that yes, there are those expressed grievances. But the driver of what we are seeing in France is slightly more diffuse and amorphous. It’s a feeling that the country is not going in a good direction. Problems are accumulating, not getting resolved. There is no sense of collective togetherness. People are fed up; it’s not always entirely clear what they are fed up with specifically. Pinning down the specific policy challenge that this episode is about may not be the best way to explain it. [Energy prices participate] in it, but it’s not the only thing. Fuel price shocks are dampened by the fact that gasoline in France is heavily taxed, and that is fine-tuned in a slightly countercyclical way. When the price of the raw material goes up, the tax is decreased, so you don’t have a direct impact on the price at the pump. It’s attenuated by the tax effect. Affordability is a theme more broadly, but it’s part of this overall landscape of dissatisfaction.

What is the tangible impact of all this unrest on businesses operating in France?

There are three levels of it:

  1. Short-term disturbance: For insurers, the cost of the damage. Some businesses cannot operate while there is disturbance in public transportation. That’s not a huge impact.

  2. Reputational impact: This is mostly on foreign investors. You have people considering making a big investment in France and see the pictures with the flames, and say, "Okay, I don’t want to invest in that country." France has been very successful with foreign investment, so it’s a not insignificant part of the economy.

  3. Political and election uncertainty: We have a highly uncertain election cycle. If you believe that public policy is important, of course, this political uncertainty generates uncertainty in the business environment.

Heading into the upcoming election cycle, what does the political reality look like between the far-right and the left?

Marine Le Pen [on the far right] and [far-leftist] Jean-Luc Mélenchon are the two polarizing figures, but when you look at the electoral dynamics, it is highly asymmetrical. Le Pen is at this point quite well positioned to win the presidential election and to be France's next president. By contrast, there is basically no plausible scenario in which Mélenchon wins. The outcome of the presidential election, in my [view, is] 50% Le Pen, 50% somebody else—somebody probably more mainstream centrist, somebody like Édouard Philippe. Less than 1% Mélenchon.

If Le Pen represents economic populism and Édouard Philippe represents orthodox governance, what does that mean for the actual prospects of fiscal reform?

There is an irony in the equation. If Le Pen gets elected as president, it is quite likely that [she] would have a workable majority in parliament to govern. And therefore, she would have a prime minister who may not be from her party, but will be broadly politically aligned with her, and she will be able to implement her policies. Conversely, [if] somebody like Édouard Philippe is elected president, it is highly likely that he will not have a workable majority in parliament. He will have a situation in parliament which is very similar to what Macron has had throughout his second term—a minority government—and that’s much less conducive to reform. Even though on the campaign trail, Le Pen is largely a fiscally reckless populist, and Édouard Philippe is a comparatively fiscally disciplined, responsible government type, in terms of implementation, it is very plausible that the Le Pen victory opens a more promising path for fiscal consolidation than the Philippe victory. That’s very ironic, a bit depressing, but I think it’s the situation where we are.

What is the broader takeaway for U.S. observers and policymakers monitoring France's fiscal squeeze?

The very general [lesson] is: fiscal discipline is a good thing; fiscal incontinence is a bad thing. It gets you into trouble one day. The common thread is an unsustainable fiscal stance. In fairness, I think the U.S. fiscal trajectory is much less sustainable than the French fiscal trajectory, but the U.S. has exorbitant privilege. Let’s remember that the U.S. pays more interest for their debt than France at this point, so it’s not clear exactly that the exorbitant privilege is that powerful right now. But discipline is good for you.

(This interview has been edited and condensed for clarity and brevity)

—Peter S. Green

Big Businesses mentioned this week:

This week, big business!

Elon’s World

The long-expected tie up of Elon Musk’s SpaceX $SPCX ( ▼ 9.14% ) and Tesla $TSLA ( ▼ 3.08% ) may be underway. In an earnings call Tuesday, Musk said both companies had set up exploratory committees of independent directors to examine a merger. There’s a lot of moving parts to it, and opposition from regulators, governments in the U.S., China or Europe, and shareholders who may not share Musk’s vision could torpedo a deal. So could markets, if the deal undermines confidence in Musk’s leadership or the combined firms’ ability to cover its bills.

The move would likely be an all-stock tie-up so no cash would change hands.What would the new company look like: With a combined market value of about $3.6 trillion at today’s market prices, it would be the world’s fifth most valuable company, alongside Nvidia $NVDA ( ▼ 4.4% ) , Apple $AAPL ( ▲ 1.23% ) , Alphabet $GOOGL ( ▼ 3.15% ) and Microsoft $MSFT ( ▼ 2.23% ) . It would combine its AI operations serving Tesla cars, SpaceX rocketships, Starlink satellites and mobile phones, and Grok and X on the Ai/Social media side. It would employ 155,000 people and generate $153 billion in revenue this year.

That all sounds great until you hear the buts. As far as cash is concerned, it would be a black hole. with negative cashflow of about $54 billion, as SpaceX ramps up R&D for new rocket ships, and invests in long-payback satellites, while Tesla continues to bleed cash. But what about synergies? “There’s a lot to be gained from co-operating on developing superintelligent software, chip design, the Terafab, obviously robotics, mass to orbit,” Musk said on Tuesday. Musk already runs both companies, and their informal ties are strong. But one “top” Tesla investor told the Financial Times that a merger is betting an awful lot of money on one man: Elon Musk: “Right now, he spends some time at Tesla and some at SpaceX, and shareholders cannot tell where he is spending most of his energy or money.” 

Among the bears on this deal: hedge fund manager Jim Chanos, who asked in a post on X on Wednesday: “SpaceX Shareholders, you sure you want to buy this 5% ROIC business for $1.5T…?!” As recently as three years ago, Tesla’s return on invested capital was over 40%.But all the money invested since has been an epic failure at increasing profitability. (ROIC is the after-tax profit as a percentage of capital invested in the company). Municipal bonds are returning over 5% with much less risk than Tesla, and the interest on them is tax-free. SpaceX is betting in  part that its AI arm will rake in the bucks. But even as SpaceX nearly doubled revenue from the second quarter to $14.6 billion from $7.8 billion, and saw net income swing from a $541 million loss in Q2 to a net profit of $4.4 billion in Q3, Musk conceded that the company is not doing much of a job selling its own AI services. AI “revenue” came from leasing out its server racks and chips to rivals including Anthropic $ANTHZZX ( ▲ 0.25% ) . That income tripled from the second quarter to $7.6 billion. 

A merger will also need approval of at least half the voting shares of each firm. Musk owns about 44% of SpaceX and 20% of Tesla, so gathering enough Tesla votes could be tough. A preview of what the combined company could do came last week with the introduction of the Tesla Roadster, a sports car that used compressed air jets to leap over traffic, but appeared to be an otherwise ordinary EV.

Musk also ramped up the anti-Elon rage on Capitol Hill this week, after the Wall Street Journal revealed that Musk himself had ordered Starlink to slow service to Ukraine's military. The decision cost scores of Ukrainian lives, as Russian missiles blasted Ukrainian cities unhindered by drones that usually run on Starlink. After Musk tried to blame President Trump for the decision, Republicans and Democrats on the Hill have called for Musk to appear at hearings. “We got to call the witnesses, got to bring them in, put them under oath and get to the bottom of it because this is a very, very serious matter,” GOP Rep. Brian Fitzpatrick of Pennsylvania said. Democrats said no one person would have the power to effectively run U.S. military and foreign policy. Fitzpatrick said Congress could block funding for any U.S. agencies or agency heads who took part in cutting off Ukraine.  

But what’s behind Musk’s decision? He’s angling for some big U.S. government contracts, including one  to provide AI  arms to the Pentagon and to Taiwan, and he wants to be on president Trump’s good side. He’s also concerned that a Democratic-controlled House or Senate would hurt his business and rake him over the coals after the midterms. So, as Trump works to close a deal with Russia to add a trickle of diesel to global markets, Musk is working to block Ukraine from blowing up more Russian refineries.

As we went to press on Thursday afternoon, the Wall Street Journal reported that President Trump called Musk on Wednesday and asked him to lift the Starlink restrictions, U.S. officials said. The system was working more normally Thursday, shortly after their conversation, U.S. and Ukrainian officials said. Sen. Richard Blumenthal (D., Conn.) on Thursday announced an investigation into how Starlink was degraded for Ukraine without notice, and the implications of the Pentagon’s dependence on SpaceX for critical satellite communications.

Perhaps to distract from all the Ukraine mess, Musk this week promised a SpaceX share for every kid in America, and President Trump said the shares would be placed in 530-A accounts. If all 72 million Americans under 18 get a single SpaceX share, now worth $159, it would cost Musk about $11.47 billion, or about 1.145% of his $1 trillion fortune. For an American household with a mean net worth of $1.29 million, this would cost $17,835. So: It’s not nothing. On the other hand, it’s not a huge amount, either.

Shares in SpaceX were up 11.8% on Wednesday, and shares of Tesla rose 3.4% on news of the would-be merger. That’s about $205 billion in market capitalization, or enough to give American children about 20 shares in SpaceX, each.

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The Short Stack

  • Meta’s $25 billion fine: “A billion here, a billion there, pretty soon, you’re talking about real money.” We may never know who first came up with that phrase, but it’s about to hit Meta $META ( ▼ 6.98% ) on the head. After a New Mexico jury ruled that meta had violated customer privacy in the state by improperly sharing user data more than 43 million times, a court this week ruled Meta would have to pay a $25 billion fine. “The extraordinary number of willful violations found by the jury, the duration and repetition of the conduct, the breadth of subjects on which violations occurred, the involvement of senior Facebook leadership, the size of New Mexico audiences reached, and the clear intentional and systematic nature of Facebook’s repeated misstatements,” warranted the hefty penalty, wrote Judge Francis Mathew. But a court filing also revealed that the court had cut the fine from $219.5 billion to just $25 billion. Even for Meta, that’s a lot. Meta says it will appeal. Also on Wednesday, Meta reported third-quarter earnings that beat market expectations, with revenue up 26% from a year ago to $64.6 billion (but that’s before cutting a $25 billion check to New Mexico). CEO Mark Zuckerberg credited the new revenue to the Muse AI bot that is creepily running user’s lives, while compiling dossiers on all their friends. Shareholders had other thoughts, and Meta shares dropped more than 7% in early trading on Thursday.

  • Maxed out? It took six years, but Boeing $BA ( ▼ 2.46% ) finally won approval from the FAA for the latest, and likely the last, of its 737 variants, the Max 10. Built on the 1960’s design of the original 737, Boeing already has more than 1,550 orders for the plane, which can carry up to 230 passengers, and will help Boeing better compete with rival Airbus, which has a broader offering of mid-sized jets. As part of CEO Kelly Ortberg’s long-term turnaround plan, Boeing is preparing designs for the 700-series’ successor, but that won’t be in service for close to a decade. Shares in Boeing are up 3.24% in the past five days. 

  • Hocked to the Max, HBO Max, that is. How did small-time filmmaker David Ellison come up with the cash to buy two of the world’s most prominent film studios and media companies, and turn them into Skydance $SKYD ( ▼ 1.02% ) ? With help from Dad, of course. Oracle $ORCL ( ▼ 2.78% ) co-founder Larry Ellison became one of the biggest single borrowers in the world in order to fund David’s media play. Remember this summer, when Larry was going to sell $7.5 billion of his Oracle stock to backstop David’s play for Warner Bros. Discovery? Well that might have sent Oracle shares plunging and triggered some messy issues with the loans he’s already guaranteed with oracle shares. Instead, he went to a string of top-flight banks and borrowed as much as $5.7 billion. The Wall Street Journal has the juicy details. That borrowing may be getting tighter and more expensive, as Oracle shares have lost 53% of their value in  the past year. 

  • Maybe change the name to Buyforce? Salesforce $CRM ( ▲ 3.52% ) has added a third AI-powered customer engagement tool to its ubiquitous platform, agreeing to pay $5.7 billion for Braze $BRZE ( ▲ 0.39% ) , which does something clever with AI to personalize customer interactions. The deal, expected to close in Salesforce's fiscal 2028, is the third major AI investment by salesforce, which controls a large share of the market for software that manages big companies' relationships with customers, basically letting the companies sell more stuff to those customers. Salesforce agreed to buy an AI data infrastructure firm called Informatica for about $8 billion in May 2025, and earlier this year it said it will buy an AI customer service company called Fin for $3.6 billion. Analysts at Evercore ISI thought the price was high, but Salesforce appears to feel pressure to get ahead of the AI wave, which is undermining its fundamental model of software as a service. In fact, in August, Salesforce announced an expanded partnership with Anthropic, including a new plugin called “Claudeforce” to let salespeople use Claude to compose emails, update records and do other administrative tasks. The investments may be paying off. Salesforce profits jumped 13% in the most recent quarter from a year earlier. While Salesforce shares fell 58% from a  December 20224 high through this past June, they’ve since recovered about two-thirds of that drop. News of the Braze deal initially sent Salesforce shares down about 1% while Braze shot up 51%. 

  • No Pepsi Coke. So much for John Belushi’s Olympia Diner, where grill cook Dan Akroyd served up only “Cheeseburger, Pepsi, Chips.” Coke $KO ( ▲ 2.87% ) is edging out Pepsi $PEP ( ▲ 3.07% ) at KFC. The deal only affects U.S. chicken joints, and not overseas KFCs or Yum Brands $YUM ( ▲ 2.12% ) outlets including Taco Bell. But Pepsi’s drink division has been lagging Coke for some time, now losing ground to Dr Pepper. Its hyper-caffeinated Mountain Dew, the drink that kept U.S. soldiers fighting in Iraq, is losing ground to energy drinks. The news is definitely more bitter than sweet for Pepsi, which owned KFC until 1997. Beverages are a hugely lucrative piece of the fast food and quick serve restaurant business, and competition for marquis placement is tight between Coke and Pepsi. Shares in KFC parent Yum Brands are up almost 10% in the past month, while Pepsi is up 5.35% and Coke is up 12% this month.

  • Bouncing off the (Big) Board: The venerable New York Stock Exchange (founded in 1792) is getting its clock cleaned by the upstart Nasdaq Exchange, (founded in 1971), as tech IPOs turn to the Nasdaq. In fact, the Nasdaq has hosted 59 IPOs so far this year, raising $120 billion, while the NYSE has launched 32 IPOs, worth a total $20 billion. Part of the reason? The Nasdaq waived its traditional checks and balances for Elon Musk’s SpaceX $SPCX ( ▼ 9.14% ) IPO, letting it join the Nasdaq’s indexes in weeks instead of years, and could do the same for Anthropic’s $ANTHZZX ( ▲ 0.25% ) planned IPO this year. That timing matters, because as soon as a stock is invited into an index, funds that trade the index have to buy large amounts of the stock.Shares in NYSE owner Intercontinental Exchange, $ICE ( ▲ 3.9% ) are up 2.6% this year. Shares in exchange owner Nasdaq, inc. $NDAQ ( ▲ 7.47% ) are up 6.2% this year. 

The Circularity

  • You thought SpaceX was Big? Details are emerging of Anthropic’s $ANTHZZX ( ▲ 0.25% ) planned IPO this year, and they are raising some big questions about the company’s business model, even as investors seem to have an insatiable appetite for getting ahead of the cloud, despite the risk. Anthropic is still aiming for a valuation near $2 trillion, even as it lost $80.7 billion on revenue of just $16.3 billion (the rest of those costs were either tied into longer-term payment deals or used investor cash) in the first half of 2026. And it foresees capital investments of $750 billion in the next few years, while relying for its cash income on just a handful of customers. Even as the rocket-speed growth of AI makes year on year comparisons essentially worthless, that loss compares with a $13 billion loss in the first half of 2025. Even as Anthropic is counting on cloud providers including Amazon $AMZN ( ▼ 4.57% ) , Google $GOOG ( ▼ 3.08% ) and Microsoft $MSFT ( ▼ 2.23% ) to provide most of its computing capacity, its plans outrun the world’s ability to make servers and chips. That’s helped turn its cloud providers into rivals as they compete for chips. Anthropic also hasn’t revealed how its Long-Term Benefit Trust, which could overrule corporate decision making, would be structured. More alarming for investors (and for citizens of the planet like you and me), are the risk factors including popular backlash against data centers, and an acknowledgement that AI models could take control and blackmail humans not to unplug them if they run amok. This week ChatGPT parent and Anthropic rival OpenAI $OPEAZZX ( ▼ 0.59% ) revealed that some chat agents deliberately turned off the notifications and safeguards that are supposed to let humans know when they’ve gone rogue. Dave? Dave?

  • Racking up the chips: Amazon is warehousing some $3 billion of Nvidia $NVDA ( ▼ 4.4% ) chips a month even before it has data centers of enough power to run the chips, according to an investigation by Business Insider. It reportedly took delivery of $5 billion of Nvidia GB300 server racks in August, and is simply warehousing them. Amazon calls the buying program “Early Rack Receipt,” and it's adding to concerns about the circular financing bubble. In this case it seems like Amazon is using its hefty cash reserves ($123 billion at the end of June) to play a game of chicken with its competitors. Buying the chips keeps them away from its rivals, slowing their growth and giving Amazon a bit more of the market. It also raises questions about Nvidia’s sales efforts, and whether deals like this have ginned up a supposed supply chain crisis.

War Story

  • War Story: With reports out late this week that the U.S. and Israel are preparing for a new military onslaught on Iran, Brent crude soared above $112 a barrel on Thursday, well above a postwar low of $72 in early July. That comes as Gulf oil exports are now above levels before the war started, with oil advisers Kpler reporting last week’s exports averaged 24.6 million barrels a day, up from 23.3 million before the Feb 28 start of the war. But the nervousness about prices and steady supply have pushed Great Britain to approve drilling at a new North Sea gasfield that had been off limits because of environmental risks. “At a time of global instability, homegrown energy can be a source of national strength,” Britain’s left of center Labour government said in a  statement on Wednesday. Chinese buyers don't seem all that bothered, buying up Middle East crude oil to replace large energy stocks they’d drawn down in the past eight months. But all is not well in the Middle East. A planned gathering of the Future Investment Initiative, a big deal investment conference,the Saudis like to call Davos in the Desert” has been cancelled, after invited speakers and guests cancelled in droves, spooked by Houthi missile attacks on Riyadh’s airports that have killed at least 13 people, injured hundreds more and left Saudi airlines looking for places to park their planes. Last year’s summit, part of plans to use the Kingdom’s cash pile to diversify away from its reliance on a vanishing reserve of fossil fuel, included Black Rock $BLK ( ▼ 1.07% ) CEO Larry Fink and JPMorgan Chase $JPM ( ▲ 0.4% ) chief Jamie Dimon.

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Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story. Email him here.