France, UK, Japan…: What's wrong with G7 economies — and its political leadership?

Going by the developments of the eight-odd months of 2025, this year does not seem to be a good time for the traditional powerhouses of the world. America looks rattled and unsettled as it tries to come to terms with the policies the president it elected with fanfare is unleashing every week. The impact is global.

Some of the biggest economies — Germany, France and the UK, for example — on the European continent are also struggling to address the issue of rising costs, which have complicated their political problems and contributed to the rise of political spectrum coloured extreme visions.

In Asia, Japan is fighting its own demons. Prime Minister Shigeru Ishiba announced that he would resign from this office amid party infighting and election woes. In the course of five years, Japan has seen three different prime ministers and is about to witness the selection of the fourth one. The story is the same for France, where one PM after another is losing a confidence motion in the parliament.

Before the UK Prime Minister Keir Starmer came to power under the Labour government, the Conservatives also saw a string of prime ministers coming and going from 10 Downing Street, London.

There are two things common among these nations: their governments have been facing instability due to looming economic challenges, and all of them are part of the Group of Seven nations, or popularly known as the G7 nations.

The group is an informal forum for leaders of seven major industrialised democracies—Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States- which was formed after the 1973 oil crisis.

Up until recent decades, the G7 was touted as one of the strongest economic bodies in the world. Not only this, but it also had a strong political influence since its decisions and declarations had a substantial impact on the global political and economic landscape. However, things have changed significantly over the years.

Not only G7 is losing its dominance to more inclusive groups like the G20 and Brics , but the member countries are also facing significant economic challenges and political instability.

Here’s how the G7 countries have been faring recently:

1. Japan

One of the recent cases in Japan was Ishiba’s announcement that he was stepping down as the country’s prime minister and as the head of his conservative Liberal Democratic Party. For a long time, the 68-year-old resisted demands from opponents and also within his party.

Ishiba’s leadership that lasted only one year, underscoring the instability of Japan’s minority government. However, in his one-year tenure, he witnessed several losses. In July this year, Ishiba’s ruling coalition failed to secure a majority in the 248-seat upper house in a crucial parliamentary election, weakening the government.

This also followed defeat in the powerful lower house, where the party-led coalition lost its majority in October, only two weeks after Ishiba took over. Anger among the people of Japan over the growing cost of living has led to the LDP-led coalition losing a majority in both houses of the parliament. Apart from this, several LDP leaders have also been facing corruption scandals.

Ishibia’s predecessor, Fumio Kishida, also faced a similar kind of scrutiny, which ultimately led to his resignation. Over the last two decades, Japan has seen more than 10 prime ministers. The rising cost of crisis living amid a weakened yen brought significant challenges to the country’s leadership.

“Japanese people are not accustomed to inflation, so even a small amount feels shocking. For many ordinary voters, Japan just feels like it’s becoming a poorer country - prices are rising but wages are not going up, and with the yen being so weak, those going abroad would find everything so expensive,” Professor James Brown of Temple University Japan told the BBC.

While Ishiba is on the verge of finalising a trade deal with the United States, Japan would still have to navigate a turbulent Trump administration and a threatening China.

2. France

Earlier this week, France’s Prime Minister Francois Bayrou lost a confidence vote in Parliament, hours after warning that the country was facing “life-threatening” debt. Bayrou was in office for just nine months and was the sixth prime minister under President Emmanuel Macron since he was first elected in 2017.

Before the vote, Bayrou warned lawmakers: “You have the power to bring down the government, but you do not have the power to erase reality. Reality will remain relentless: expenses will continue to rise, and the burden of debt, already unbearable, will grow heavier and more costly.”

Bayrou’s warning came after the parliament denounced his budget, alleging that it targets the poorest of the poor in France. For decades, France has spent more money than it has generated. As a result, has to borrow to cover its budget.

The French government has said that the public debt stood at €3,345 billion, or 114% of GDP, in early 2025. What is concerning is that this is the third-highest public debt in the eurozone after Greece and Italy, and equivalent to almost €50,000 per French citizen.

Last year, France’s budget deficit was 5.8 per cent of GDP, and this year’s picture also looks grim. Hence, public debt will continue to grow as borrowing covers the shortfall. Apart from this, France is also facing a demographic headache of an ageing population - fewer workers being taxed and more people drawing the state pension, adding fuel to the fire.

However, France was unable to introduce a new budget because Macron’s gamble of snap elections led to a hung parliament, with no clear majority, causing changes in the French PM one after another.

3. UK

Until July 2024, when UK PM Keir Starmer’s Labour Party won the general election, the Conservatives had a turbulent government in which the UK witnessed 4 new prime ministers in a short span of time. In contrast, there were just three prime ministers in the 28 years before — Margaret Thatcher, John Major and Tony Blair.

These frequent change in PMs and eventually a change in government after 14 years also stems from the cost of living crisis that has been persistent in the UK for decades. The British economy even entered the phase of modern-day recession after it faced negative growth in the second half of 2023.

This recession was marked by two consecutive quarters of shrinking GDP. After recovering from the recession in May 2024, the British economy had seen sluggish growth. The country is also at a risk of “stagflation” — where inflation remains high while GDP growth slows down.

Since the inflation remains above the Bank of England’s target levels,  rising energy, food and housing costs are significantly squeezing the economy. Things did not change much with the advent of the Starmer government. The British economy shrank in May 2025, even at a time when US President Donald Trump’s sweeping tariffs were paused.

The Office for National Statistics (ONS) said gross domestic product (GDP) contracted by 0.1 per cent in May, contrary to the optimism expressed by the experts. In light of this, UK Chancellor Rachel Reeves said the figures were “disappointing” and she was “determined to kickstart economic growth”. However, Reeves has been facing significant pressure from the Tories over her budget, unable to improve the British economy.

4. Italy

Italy comes as a stable member under Prime Minister Giorgia Meloni, but has its issues with low economic growth and high public debt. After Greece, Italy still has the second-highest public debt in the eurozone.

Part of the reason Meloni came to power was that Italy faced economic stagnation, high debt, inflation, concerns about immigration, and a sense among many citizens that mainstream parties were not handling things well.

Not only this, but Italy saw several unstable governments, including the national unity government under Mario Draghi. Meanwhile, Meloni’s party continued to stay mostly outside of the coalition, which positioned her as an “outsider” or alternative to the status quo.

While with Meloni in power, Italy saw modest growth, a decrease in inflation from post-Covid highs, and a better labour market, slow growth, high public debt and demographic issues continue to plague Italy.

5. Germany

Before German Chancellor Friedrich Merz, Berlin was under what was called a “traffic light coalition” with SPD, Greens and FDP struggling to hold on to the parliament majority. Apart from this, Germany was also facing economic stagnation, energy crisis (after the Ukraine war and reduction in Russian gas), inflation, supply chain issues, etc and hence, many voters felt dissatisfaction with how the government was handling these crises.

In November, the Olaf Scholz-led governing coalition collapsed, prompting an early election. In the February 2025 election, CDU/CSU under Merz emerged as the strongest bloc (though with a relatively low vote share historically).

Since no party had an outright majority, coalition formation became essential. Merz managed to negotiate a coalition agreement with the SPD (Social Democrats) — despite ideological gaps — which enabled him to secure a governing majority in parliament. He was eventually elected as the German Chancellor on May 6, 2025.

Despite a change in the government, the German economy continues to face numerous challenges. Unemployment has risen. The rate is about 6.3 per cent in 2025, with expectations that it may decline to 6.1 per cent in 2026. The government deficit is expected to shrink somewhat, helped by phasing out temporary assistance, though spending pressures (defence, pensions, etc.) remain.

The German economy contracted in both 2023 and 2024, and the forecast for 2025 is basically stagnation or very low growth: about 0.2‑0.3 per cent from Ifo and other institutes. However, slightly better growth is expected in 2026.

6. Canada

The cost-of-living crisis in Canada was one of the major reasons why Canadian Prime Minister Justin Trudeau had to resign from his post, paving the way for Mark Carney, former Canadian central bank governor, to take over.

Under Trudeau, inflation rose significantly, peaking around 6‑8% in 2022, eroding household purchasing power. Housing affordability became a crisis in major cities.

Prices shot up, supply was constrained, and many Canadians felt the government’s policies were not keeping up. The high cost of food and energy, compounded with slow growth and other ethical issues, led to the fall of Trudeau.

However, things have been looking stable for Canada with the advent of Canadian Prime Minister Mark Carney, who is leading the same Liberal Party, which was once led by Trudeau.

After coming to power, Carney has announced several large‑scale projects to “turbocharge” Canada’s economy, expanding production at LNG Canada in British Columbia and port expansion in Quebec. However, tariffs imposed by US President Donald Trump continue to remain a major challenge for the Canadian premier.

7. US

During the run-up to the 2024 Presidential elections, many voters in the United States leaned towards US President Donald Trump with hopes for a better economy. While the American economy under Biden improved significantly post-pandemic, the working class in the country was hoping for a better life.

However, things took a drastic turn after Trump returned to the White House. His tariffs on foreign goods not only rocked the global economy but also shook the American market, with Wall Street witnessing a dramatic fall.

In June, it was reported that the US economy shrank faster than previously thought during the first three months of 2025, with growth contracting for the first time in three years.

According to the third and final GDP report, the country’s gross domestic product fell at an annual rate of 0.5 per cent from January through March. The Labour market is facing the same struggles as well. While Trump has often rejected the numbers, the tariffs are expected to impose more pressure on American customers.