As a dual Irish and French national, following the past week’s news has been like living in two parallel dimensions.

France’s government fell over proposed €44 billion budget spending cuts, through a self-imposed vote of confidence triggered by then-Prime Minister François Bayrou. Meanwhile, the Irish Fiscal Advisory Council (Ifac) highlighted that “Budget 2025 forecast a €3 billion increase in spending, but actual spending is likely to rise by €7.6 billion”.

The Irish Government is planning to follow up with a €9.4 billion budget package next month. Ifac’s pre-budget statement pointed out that such largesse was possible only thanks to so-called windfall corporation tax – the annual €10 billion or more multinationals pay into Ireland’s Exchequer as a result of tax optimisation, without link to domestic activity, which could dry up overnight if tax rules changed in other countries.

Covid-19’s scars remain apparent in both France and Ireland’s public finances. In both cases, governments protected businesses and households from bankruptcy – “whatever the cost”, as French President Emmanuel Macron said at the time.

The difference was that the digital and pharmaceutical multinationals that thrived during the pandemic paid their tax in Ireland, not in France. The result was best illustrated by this chart in the Annual Report on Public Debt published by the Department of Finance earlier this month (my colour highlights).

In the top-right corner, France has both the third-largest and the third-fastest-growing public debt in the EU relative to GDP. It is on course to reach the top on both metrics if nothing changes. 

At the bottom, Ireland’s debt is falling the fastest, and now stands mid-league as a proportion of modified national income, the best alternative to GDP to measure the size of the Irish domestic economy (excluding multinational activity offshored here).

On a per-capita basis, Ireland’s public debt stands at €40,500 per person, compared to €48,200 in France. The French figure, however, includes State-backed social security institutions covering occupational pension schemes and public healthcare insurance, which are on the private sector’s balance sheet in Ireland. 

On a like-for-like basis, the stock of debt per citizen is therefore not significantly different. The main difference between the two countries lies in the relatively smaller size of the French economy to carry the burden of its population’s debt.

The pitfalls of centralised power

In my parallel dimensions, most Irish political correspondents’ bedtime reading in the past week was former Taoiseach Leo Varadkar’s memoir Speaking My Mind, while I was reading the former French education minister Jean-Michel Blanquer’s equivalent, La Citadelle. Judging by Oliver’s must-read review of Varadkar’s book yesterday, each contains a similar volume of predictable and eminently skippable self-justification.

Blanquer’s account of his time as France’s longest-lasting education minister in living memory and member of Macron’s inner circle during the president’s first term from 2017 to 2022, however, is enlightening on a shift in the presidential exercise of power.

With schools a central plank of lockdown and re-opening policies during the pandemic, Blanquer had a front-row seat in the necessary centralisation of decision-making at that time. He is admiring of Macron’s ability to handle constantly evolving medical information while making swift decisions directly affecting the lives of 68 million people.

By the time the Omicron variant erupts, however, Blanquer regrets this excessive centralisation and remarks that Macron, along with a small circle of unelected advisers, has lost the ability to take outside opinions on board. While the former minister’s opinion is clouded by his own exclusion from that circle after he refused to stand in a regional election himself, his analysis is convincing.

Macron’s second term has descended into a one-sided, unconciliatory approach to power inaugurated by the 2023 pension reform. Of all the levers available to bridge France’s widening pension funding gap, the president chose to raise the standard retirement age – the option most directly opposed by trade unions, who had no difficulty drawing well over one million people to the streets in protest.

At least Macron had a majority then, and duly passed corresponding legislation, but his pyrrhic once-off victory gave Marine Le Pen’s far-right opposition a boost to win the June 2024 European election. That same day, the president called a Theresa May-esque snap National Assembly election, in which he predictably lost his majority to a three-way hung parliament between his loose centrist bloc, Le Pen’s National Rally, and assorted left-wing parties.

After clearly sharing his opinion that the electorate had been wrong, Macron’s response over the past year has been to double down through a minority alliance with the centre-right. He appointed Michel Barnier, then Bayrou as prime ministers, only to see them fall at budget time. (The current budget was belatedly watered down in a once-off vote agreement with the centre-left.)

Bayrou was, much like Macron, a my-way-or-the-highway type of politician. Now the jury is out on his successor, former defence minister Sébastien Lecornu. While from the same right-of-centre political wing, he has promised more dialogue. 

Lecornu’s initial win was the failure of calls for a “blockade” of the country to turn into a gilets jaunes-type maverick mass protest movement on Wednesday, albeit at the expense of the early-morning deployment of 80,000 police officers to prevent the erection of any barricades.

By comparison, the parallel dimension of Irish politics feels reassuringly stable – for now. It demonstrates the superiority of a parliamentary system built on consensus over the presidential regimes wreaking havoc on France and the US. In private, French officials admit that their country’s political situation is essentially frozen until the next, high-risk presidential election in 2027. 

As Irish voters prepare to vote in the presidential election, they should be grateful that such a personalised contest does not grant the successful candidate winner-takes-all access to power.

None of this should be taken for granted, however. Political radicalism can, and in many countries does, contaminate a well-designed parliamentary system. 

As for public finances, France is not alone in facing gaping Exchequer deficits. All major European economies have incurred heavy debts since the pandemic and must fill those holes. 

The OECD-brokered agreement on the taxation of multinationals is slowly unravelling under the pressure of the Trump administration, with no hope of implementing its Pillar One section to re-allocate some tax revenue to market countries.

Those countries scrambling to plug government deficits, including France, are home to most users of the digital services sold to them out of Ireland. They are now likely to take the money where it is and go back to the disorderly national digital taxes paused during OECD negotiations. 

*****

Elsewhere this week, the international head office of the law firm Eversheds Sutherland announced that it had signed up 26 partners from its previously independent Irish member firm to establish new offices in Dublin and Belfast. Led by Pamela O’Neill, this faction had rejected an internal plan to merge with William Fry. Tom had the inside story of the divisions at the firm and the fate of partners and workers who got caught up in them.

Jonathan attended the Government’s presentation of its new strategy on competitiveness, underpinned by innovation and intellectual property attractiveness, and asked whether a much-awaited referendum on Europe’s Unified Patent Court would take place this year. He received mixed signals in response.

Manguard, a security company with over 1,000 employees, is preparing to file overdue accounts with new directors and auditors. The company provided partial answers to questions from Tom on this process.

In a detailed interview, Brian Walsh, the CEO and co-founder of financial software firm Reitigh, told Michael about plans for international expansion, why the company’s name changed to Resolve – and why he thinks AI is overhyped.