Friday 30th October 2026
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Phil speaks with Paul Mortimer-Lee, Research Fellow at the National Institute of Economic and Social Research (NIESR) and former Bank of England forecasting head, to examine the deepening fiscal strain across Europe and determine whether France or the UK is in a more dangerous position. Paul argues that France is caught in a structural spending trap—with government outlays at an eye-watering 57% of GDP and political fragmentation making deficit reduction nearly impossible—leaving markets to rely on the moral hazard of an eventual European Central Bank intervention, even if its untested Transmission Protection Instrument (TPI) faces legal and political hurdles. By contrast, while the UK’s Autumn Budget deferred meaningful consolidation via a "flotilla of small measures" amid rising debt-servicing costs and overambitious welfare dependency, London’s independent currency and floating exchange rate mean market discipline bites faster, whereas France lacks an exchange rate valve to offset its competitiveness gap against the rest of Europe. With Germany’s constitutional debt brake hampering broader continental growth and bond markets demanding higher risk premiums, Paul reckons that French 10-year yields could surge another 100 basis points and provoke banking contagion before European policymakers reluctantly to step in. But beyond that, does this point to an instability that the Euro - or the ECB – can’t survive?
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