Why Europe Is Burning by Niall Ferguson

 

Why Europe Is Burning

Young Europeans are taking to the streets in Paris, Madrid, and Brussels. They say they want more investment in schools and housing. They should be protesting a system rigged for their grandparents.

Niall Ferguson

Oct 19, 2026

https://niallferguson.substack.com/p/why-europe-is-burning

 

“The most French thing I’ve ever seen” was a couple sipping wine in a sidewalk café, probably discussing Jean-Paul Sartre, while a fire started by protesters raged on the other side of the boulevard. Disappointingly, the video posted on X was from three years ago, but it suited the moment last week.

As their national anthem contains the phrase, “Aux armes, citoyens!,” don’t be surprised if, quite regularly, young French people decide to reenact revolutionary scenes. As I write, French schools are burning—set ablaze by high schoolers who say they want more investment in education but for some reason think they can achieve this by filling the streets with garbage, setting it on fire, waving Palestinian flags, and clashing with the police. The latest reincarnations of the sans-culottes are out in force—though, as in 1968, their attire is quite chic. As a cynical friend observed, what the first Communion is for a young Roman Catholic, so the first manifestation is for a young Parisian: a rite of passage.

And yet it’s not just France. The kids are out in the streets of Madrid, too, incensed (they claim) about a growing housing crisis. In Brussels the burning issue is government budget cuts.

So what’s going on in Europe?

No, I don’t think it’s the beginning of Eurozone Crisis 2.0. Those with good memories will recall that the first Eurozone crisis began in 2009 with a Greek debt crisis that spread to other countries. As we shall see, the recent wave of protests has indeed coincided with a French debt crisis that also threatens to spread to other members of the Eurozone. However, if the European Central Bank (ECB) learned anything from the events of 2011–2012 it was that it must stand ready “to do whatever it takes to preserve the euro”—the immortal words of ECB president Mario Draghi in July 2012. If French bond yields go up much higher—say by another 100 basis points (1 percent)—then the ECB has the tools to intervene and stabilize the market.

No, rather than a financial crisis, what we see today is more like synchronized political crises in multiple European countries. France will elect a new president on April 18, and it looks as if the far-right Marine Le Pen could finally win at the fourth attempt. In Spain, the leftist prime minister Pedro Sánchez has just called snap elections for November 29; I expect him to lose. In Germany, Chancellor Friedrich Merz lurches from crisis to crisis as the far-right Alternative für Deutschland keeps winning regional elections. In Italy, Giorgia Meloni needs an election soon, before any more of her coalition’s supporters defect to Roberto Vannacci’s authentically fascist Futuro Nazionale.

Rassemblement National president Marine Le Pen (third from left) attends a session during RN’s parliamentary window in Paris on October 8, 2026. (Lou Benoist/AFP via Getty Images)

The fact that young people are setting wheelie bins on fire is in some ways a distraction from the root causes of all this political instability. For, despite the echoes of 1789, 1830, 1848, 1871, and 1968, when youthful revolutionaries challenged Europe’s established order, the generational politics of 2026 is very different. Today, by historical standards, the young are an endangered species. They are dimly aware that they are being screwed, but they don’t appear to understand who’s doing the screwing.

A clue for the European young: It’s not Donald Trump or Benjamin Netanyahu or whoever else you want to burn in effigy. Mais, non: It’s your grandparents.

Let’s begin with the proximate cause of this crisis, which is, admittedly, the war that Trump and Netanyahu launched against Iran at the end of February, and the resulting economic strife. After more than seven months, that war is still not over. Indeed, in some ways it has escalated, in that the Houthi rebels have joined in the fun by attacking the Saudi pipeline to the Red Sea and now launching missile strikes on Riyadh’s airport. Meanwhile, despite a sustained effort by the United States to collapse the Iranian economy, the Islamic Revolutionary Guard Corps still has enough firepower to disrupt shipping through the strait, reversing the recovery we have seen in recent weeks.

This oil shock has not been as economically disruptive as the comparable supply disruptions of 1973–1974 and 1979. Prices of natural gas in Asia and Europe are more than double their prewar level, but oil has been less impacted. Diesel prices are up more than gasoline. The most significant economic impact of the war is that bond yields are back to where they were before the 2008–2009 global financial crisis.

Economists like to argue about why long-term interest rates have risen. Is it because people expect higher inflation? Is it because governments are competing with artificial intelligence investors for a finite amount of capital? For our purposes, all that matters is that the rate at which the French government borrows money for 10 years has risen from 3.22 percent on the eve of the Iran war to 4.87 percent at the Friday close. An increase of more than 1.5 percentage points may not sound like much, but that’s a 50 percent jump in borrowing costs—and it’s a serious problem when the gross public debt has reached 119 percent of GDP. If France’s more or less paralyzed National Assembly cannot pass a budget in the coming weeks, the deficit in 2027 will be around 6.5 percent of GDP.

Yes, I know: Everyone’s bond yields have gone up, including Uncle Sam’s. Indeed, the U.S. 10-year Treasury yield was yielding 5.22 percent on Friday, higher than the French. And the U.S. deficit for 2027 will be about the same as the French. The difference is that the U.S. economy is growing at 6.3 percent nominal (including inflation). The equivalent number for France? It’s 1.9 percent. When growth is above the interest rate, you’re okay. When it’s the other way round, you’re heading for a crisis.

France is not alone. In both Italy and the United Kingdom, the cost of government borrowing is higher than the nominal growth rate. What has gone wrong? Here’s where grandma and grandad come in. The French (and British and Italian) fiscal crisis is at root due to generational imbalances in welfare and tax systems, exacerbated by reflexive Keynesian spending every time anything nasty happens (a financial crisis, a pandemic, a war, an energy shock).

These are no countries for young men. (The same, by the way, is true of most of East Asia.) Since 1960, across the 38 advanced economies that belong to the Organization of Economic Cooperation and Development (OECD), the old-age dependency ratio (people age 65 and over per 100 people ages 15 to 64) has doubled from around 15 to around 30, while fertility has plunged from 3.3 to 1.5.

Youth just matters less than it used to. The age group that historically is most inclined to riot is 15 to 24. Back in 1968, that was a significant proportion of the French (and South Korean) population: 16 percent and 18 percent respectively. Today, the youth share is much lower—12 percent and below 10 percent—whereas in India it has grown from 16.6 percent to 17.5 percent. That helps explain why India’s “cockroach” movement, a student protest movement, has been so much more politically effective than today’s French school protests.

The July Column, in the center of the Place de la Bastille, stands vandalized and covered in graffiti in Paris, France, on October 8, 2026. (Gauthier Bedrignans/Hans Lucas/AFP via Getty Images)

As is well known, Europe has relatively generous welfare systems, which do more taxing and redistributing than their U.S. equivalents. It’s just that these systems were designed for 2.5 children per family and an average life expectancy of 62, not 1.25 and 79. With a few exceptions, the various European models are in the early phase of a nosedive into insolvency.

To be sure, aging isn’t the sole driver of rising public debt. It explains about two-fifths of the increase since 2000. The rest is due to debt-financed spending in response to the financial crisis, Covid-19, and other crises; tax cuts and discretionary spending; and the rising cost of paying interest on the debt. And the aging problem varies from country to country. No European country is aging as fast, nor reducing fertility as much, as Japan and South Korea.

This aging trend is not about to stop. Across the OECD, the dependency ratio is forecast to rise from 32.6 seniors per 100 people of working age in 2024 to 55.2 in 2054—a 69 percent increase. The working-age population will decline by 13 percent over the next four decades across the OECD. (In Italy, Latvia, Lithuania, and Poland the decline will exceed 35 percent.)

This is not primarily a problem of public pensions—the original government welfare program, introduced by the German chancellor Otto von Bismarck in 1889. The OECD’s latest projections have average public pension spending rising from 8.8 percent of GDP in 2023–2024 to 10 percent in 2050—not a crippling increase. This is because most countries (not all) have acted in various ways to cap the costs of public pensions, either by reducing benefits, restricting coverage, or raising retirement ages.

The real problem is the cost of elderly healthcare. The European Commission’s 2024 Ageing Report estimated that total age-related expenditure—pensions, healthcare, long-term care, and some other age-related items—would rise by about 1.2 percentage points of GDP between 2022 and 2070 in its baseline scenario, reaching 25.6 percent of GDP by 2070. However, under less rosy assumptions about healthcare and long-term care, the increase could be three times higher (roughly 3.9 percentage points).

In essence, politicians on both sides of the English Channel have gotten into the very bad habit of bribing seniors based on the observation that they are increasingly numerous and have relatively high turnout rates in elections. Spending on the over-65s has risen in Britain by 2.5 percentage points of GDP since 2000; the French figure is close to 3 percent. In both France and Britain, median incomes, adjusted for inflation, have risen almost half as much again for over-64s as for 18 to 64s. In other words, it has paid better in both countries to be retired than to be employed.

Young people will set more things on fire; if not their own schools, then asylum-seekers’ hotels and synagogues as a rising share of young men swing to the far right.

Since 2000, the public cost of healthcare and other care for Britain’s over-65s has doubled. A disastrous Liberal Democrat policy, adopted by the Conservative-Liberal coalition in April 2011, committed the government to increase the state pension by whichever was the highest of inflation, wage growth, or 2.5 percent (the so-called “triple lock”). Sir Keir Starmer’s government suffered its first serious reverse when his chancellor of the Exchequer, Rachel Reeves, was forced to reverse plans to means-test pensioners’ winter heating subsidies. Starmer’s successor, Andy Burnham, has said he will modify the “triple lock”—but not until after the next election, and even then only in a limited way. (The rate of wage growth will still be considered, but not on an annual basis.) Exemplifying the problem, Burnham has already committed to blowing the savings on a new National Care Service. Because why not add another entitlement before the ship of state goes under?

And yet you’d rather be Britain than France, and not just because there are a lot more French oldies than British oldies, and a lot more young Brits than young Frogs. (The unique British pathology is the ludicrously high proportion of young people living on benefits such as “personal independence payments,” dished out to anyone feeling a bit depressed.) The French rioters say their principal grievance is under-investment in schools. But it should really be over-investment in French retirees. For a time, until very recently, according to the Financial Times, “over-65s [had] higher average incomes than the working age population—unique both internationally and in France’s own history.” When President Emmanuel Macron proposed to raise the French retirement age, it was “aux armes, citoyens” yet again. Two successive governments fell over the issue.

The United States has its own version of these problems. Roughly a third of the deterioration of the U.S. federal deficit since 2007 can be attributed to the aging of the population. And yet, as The Wall Street Journal reported last week, “Wealth increased 37 percent for Americans 75 and older, while it declined 23 percent for people under 35. During this period, people 75 and older became the richest age group, with a median net worth of $505,000.” It’s the boomers’ world, and young people just get to rent in it. In a separate piece (as if to rub it in), the Journal enthused: “ ‘Superagers’ Are Living—and Thriving—Long Past 80.” One of them is in the White House.

One fine day, it will be the painful task of some heroic, one-term president to grasp the third rail of Social Security and Medicare reform. But that day is not tomorrow. In France, the day of reckoning is here and now.

Unfortunately, the French Fifth Republic is ill-equipped to meet the challenge. The vocabulary of European politics rules out the sentence: “We need to reform seniors’ entitlements so that we don’t go bankrupt.” Instead, the left offers socialism and the right serves up national socialism. The left lays the blame on billionaires, whom they will tax to pay for yet more benefits. The right lays the blame on immigrants, whom they will deport as if that will help matters. Apart from that difference, there is a horseshoe forming in Western politics: At the extremes, socialism and national socialism are converging on economic issues (industrial policy, public ownership, rent controls), not to mention foreign policy (blame Israel for everything). Of course, these tired old ideas bear almost no relation to economic reality.

So what happens? I think young Europeans have been so successfully indoctrinated in school and college that they’ll blame almost anyone for their dissatisfaction, except the people who are actually responsible: namely seniors and the politicians who rely on their votes. So instead of voting for (if such a thing existed) a European version of Argentina’s Javier Milei—who campaigned for radical fiscal reform precisely to create better opportunities for the young—they’ll try the old, been-there-done-that solutions, and the results will be a weaker euro, more inflation, downgrades by the rating agencies, and even higher interest rates.

As a result, despite their fine pledges to spend more on national security, few European governments will modernize their air defenses in the way they clearly need to as the Russian drone menace extends beyond Ukraine. A shocking amount of European defense spending goes to—you guessed it—the pensions of retired military personnel.

Young people will set more things on fire; if not their own schools, then asylum-seekers’ hotels and synagogues as a rising share of young men swing to the far right. That will achieve precisely nothing, except to expedite the capital flight. Every government will have a half-life of 12 months.

Trash cans burn during a blockade of Colbert high school in the 10th arrondissement of Paris, France, on October 8, 2026. (Frederic Vielcanet/Gamma-Rapho via Getty Images)

Fiscal reforms are doubly hard if you also have a multiethnic population and a multiparty political system. It is a well-known fact that Americans have retained the two-party system for all intents and purposes (I leave for another day the mystery of the registered “Independents”). That is not true in Europe. The Croats have 21 parties in their national legislatures. The Dutch have around 17. The Spaniards have about 13, the Italians nine, the Greeks seven. I could go on.

Less well-known is that, in marked contrast to the last 200 years, the major European states are now as multiethnic as the United States. The foreign-born share of the American population is 16 percent, an all-time high. However, the figures for the UK, Spain, and Germany are even higher. The great migration to Europe that culminated in the decade 2015–2024 was motivated partly by an economic theory: that aging societies needed young blood. Future historians will marvel at the scale of this miscalculation.

In The Constitution of Liberty (1960), the great classical liberal economist Friedrich A. von Hayek predicted that “concentration camps for the aged unable to maintain themselves are likely to be the fate of an old generation whose income is entirely dependent on coercing the young.” He could not have been more wrong. The aged have conclusively won the war of the generations in Europe. What we are witnessing is merely the death throes of a dream.

“Bliss was it in that dawn to be alive,” wrote William Wordsworth, recalling his youthful enthusiasm for the French Revolution, “But to be young was very heaven!” He was just 21 when he visited revolutionary France in 1791. What would he write if he could see Paris today?

“Bliss was it that eve to be alive, But to be old was very heaven!”

This essay first appeared in The Free Press on October 12, 2026