Violence, looting, arson: France faces an ominous doom loop

• The right-wing National Rally party seized on the events, positioning itself as the party best poised to restore order in elections next year.

• The events drove a new surge in French borrowing costs, with the benchmark 10-year French government bond yield rising 0.15 percentage point Monday, to 4.93%, flirting with new multidecade highs.

The big picture: The events show the risk of a doom loop among fiscal policy, politics and markets — one that looks particularly ominous in France at the moment but that could equally apply to other advanced economies running large deficits, including the United States and Britain.

• Persistent deficits and rising interest rates compel fiscal austerity, but austerity — especially if it involves cutting pension and other public benefits — is deeply unpopular.
• This toxic unpopularity can cause people to take to the streets, and to elect leaders who promise to maintain benefit levels and defy the fiscal math.
• This generates bond market blowback in the form of higher rates, which makes reining in deficits all the more urgent. Rinse and repeat.

The bottom line: The technocratic challenge of putting major advanced democracies on more sustainable fiscal footing is difficult. But managing the politics is looking downright impossible.