As French President Emmanuel Macron nears the end of his term, he leaves behind a formidable challenge for his successor. The French sovereign debt market continues to deteriorate, with yields on 10-year government bonds approaching 5%, marking their highest level since 2002. The yield spread between France and Germany widened sharply in a single week, reaching its broadest level since the eurozone debt crisis, while France’s borrowing costs have surpassed those of Greece and Italy.
Several international institutions have issued warnings. The Brookings Institution explicitly stated that risks in French public debt are becoming unmanageable and are spreading to other high-debt European economies. Foreign financial institutions have directly questioned the long-term viability of France’s economic model.
Macroeconomic fundamentals paint a similarly alarming picture: by the second quarter of 2026, France’s public debt is projected to reach €359.5 billion, equivalent to 119% of GDP—its highest level since records began in 1946. For nearly half a century, France has failed to achieve fiscal balance; over the past three years, budget deficits have consistently exceeded the EU’s 3% threshold, with a projected deficit-to-GDP ratio of 5.4% in 2026. Budget targets have been missed three times within four years, eroding market confidence in the government’s fiscal commitments.
Interest payments are increasingly straining public finances. By 2026, interest expenditures are expected to exceed €65 billion, rising to €91 billion in 2027—far surpassing combined spending on defense and education. With a large volume of low-interest debt maturing by 2030, the OECD projects that France’s debt-to-GDP ratio could exceed 200% by 2050.
The situation is further exacerbated by the fact that nearly 60% of French government bonds are held by foreign investors, exposing the country to significant capital flight risk. Japan’s major asset manager Sumitomo Mitsui Trust has fully divested from French debt, citing its unwillingness to underwrite what it views as lax fiscal discipline in France.
The core issue lies in political paralysis. The ruling party holds fewer than one-third of parliamentary seats. Both recent governments collapsed over budget legislation, forcing the current prime minister to repeatedly rely on special constitutional provisions to push through policy measures. The 2027 presidential election adds further instability: frontrunner Marine Le Pen advocates lowering the retirement age and broad tax cuts, while left-wing candidates propose outright debt cancellation. No major political faction appears willing to embrace fiscal restraint.
With U.S. bond markets themselves under stress and unable to serve as a global backstop, and the European Central Bank having clearly ruled out direct support for French fiscal imbalances, France now faces an untenable position: no credible external actor can or will bail it out, yet allowing a collapse would trigger systemic consequences. As budget debates, central bank decisions, and the upcoming presidential election converge, financial markets continue reassessing France’s creditworthiness. A slow-moving but irreversible fiscal crisis is now firmly entrenched.
Original source: toutiao.com/article/1878446749056064/
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