Fiat currency systems usually end with debts soaring to unmanageable levels and governments powerless to stop the resulting carnage. Japan and the US will get there eventually. But Europe is tipping into the abyss in real time.

Germany’s self-inflicted deindustrialization is a mess so vast (and sad) that it will get a post of its own soon. But for now, France is the headline story. Its budget deficit is out of control, and the current government’s attempt to impose even modest spending cuts has led to revolts on both the left and right. From today’s Epoch Times:

French Government on Brink of Collapse as No Confidence Vote Looms

France’s government is on the brink of collapse after right- and left-wing parties united on Dec. 2 to say they would back a no-confidence motion against Prime Minister Michel Barnier following his decision to push a budget through Parliament.

Barnier, an ally of President Emmanuel Macron, invoked a special constitutional tool on Dec. 2 to push through the controversial 2025 social security budget without a parliamentary vote following a last-minute concession that failed to gain support from Marine Le Pen’s right-wing Rassemblement National (RN).

“The French have had enough,” Le Pen said. “Maybe they thought with Michel Barnier things would get better, but they were even worse.”

Mathilde Panot, from the left-wing party France Unbowed, said: “Faced with this umpteenth denial of democracy, we will censure the government. … We are living in political chaos because of Michel Barnier’s government and Emmanuel Macron’s presidency.”

If RN members of Parliament vote with their left-wing colleagues to support the motion, the government will not survive.

Macron appointed Barnier in September, but his austerity budget—featuring 40 billion euros ($42 billion) in cuts and 20 billion euros ($21 billion) in tax hikes—has been widely criticized, escalating tensions in Parliament.

If the government in Paris collapses, two of the European Union’s largest economies, with Germany also in election mode, would be in a state of flux simultaneously.

The development has already unsettled financial markets, with borrowing costs rising sharply amid fears of instability and the euro weakening against the dollar.

Austerity = Civil War, Followed By Currency Reset

Once a populace has grown dependent on ever-increasing government largess (which can include everything from social programs to low taxes to high military spending to cushy public-sector jobs), it reacts violently to any attempt to restrain spending.

The government, trapped between the risks of inflation if debt continues to pile up and civil unrest if spending growth slows, typically tries to scale back social programs and raise taxes — a policy known as “austerity” — and is always and everywhere met with resistance. The government then caves or is replaced, and lets the debt orgy continue. This eventually destroys the currency.

So here’s a year-ahead prediction:

The French government falls and is replaced by big-spending technocrats. Or it caves to the threat of replacement and leaves spending growth on its current high trajectory. Either way, the euro in its current form is doomed.

Speaking of the euro, how’s it doing while France struggles? Very badly. But with the US threatening trade wars and Germany now an economic and political basket case, France doesn’t deserve all or even most of the blame. But it does illustrate the point that failed austerity is a fiat currency death sentence.