France faces €3.5tn debt burden as bond yields near 5%
France’s borrowing costs have surged as investors question whether its minority government can rein in public finances, while protests oppose planned cuts. The €43bn budget package is a test of whether Paris can calm markets without deepening a political confrontation that could spill across the eurozone.
Bottom line — France’s 2027 budget and presidential contest will test whether fiscal plans can steady markets before debt interest reaches €91bn.
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The Financial Times reports that French 10-year yields briefly neared 5% and the spread over German bonds topped 1.5 percentage points.
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The Financial Times says France’s public debt has reached €3.5tn, nearly 120% of GDP; interest payments are forecast at €79bn this year and €91bn in 2027.
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Prime Minister Sébastien Lecornu’s proposed €43bn package includes curbs on pension increases and a partial freeze on civil-service salaries, according to the Financial Times.
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The Financial Times reports that France’s deficit is forecast at 5.4% of GDP this year, while the government aims to bring it to 5% in 2027.
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Banque de France governor Emmanuel Moulin told the Financial Times that France risks being “gradually strangled by rising interest rates” if it does not act.
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Moulin said the focus should be on French elected representatives repairing public finances, not on whether the European Central Bank will intervene, the Financial Times reports.
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The Financial Times says investors are watching whether budget opposition and next year’s presidential election could derail plans to reduce the deficit.