France's public debt, at around 120% of GDP, is pushing up borrowing costs. The risk premium over German bonds, the spread, has more than doubled since June 2026 and is now at its highest level since the financial crisis, as the country faces nationwide protests, a government without a parliamentary majority, and mounting fiscal pressure.
France last balanced its budget in 1974, and for more than half a century has spent more than it collects. The spread on 10-year bonds now stands at nearly 1.6 percentage points over German bunds, signalling what Friedrich Heinemann, an economist at the Leibniz Centre for European Economic Research (ZEW), called a “fever gauge” for bond markets. “If the spread rises too sharply, France's financing conditions come under pressure, and anyone in France who needs a loan has to pay higher interest rates. Banks then get into trouble, and the crisis escalates further,” Heinemann told DW. He said that this could “slide toward a financial crisis, which would finally send a clear signal to everyone: Things cannot continue like this unless you are prepared to risk a genuine economic collapse.”
France is expected to pay more than €79 billion in interest on total public debt in 2026, with that figure projected to exceed €91 billion in 2027 and potentially reaching between €125 billion and €132 billion by 2030. The central government's interest bill alone is currently estimated at €62.6 billion by the Agence France Tresor. In the coming years, France must refinance large amounts of bonds issued when interest rates were historically low, while its substantial budget deficit means it must take on additional debt.
The far-right National Rally (RN), led by Marine Le Pen, and the far-left France Unbowed (LFI), led by Jean-Luc Mélenchon, are both campaigning on costly promises. Le Pen wants to reinstate the retirement age of 62 while promising €140 billion in savings. Mélenchon has suggested that government bonds held by the French central bank should be “thrown into the fire,” saying “nobody will ever notice they've disappeared.”
Heinemann described these positions as "a good example of radical parties on both the right and the left simply telling economic fairy tales," adding that their common message is that "there is a way out of this mess that requires neither fiscal consolidation nor painful cuts."
Landry Charrier, a researcher at the University of Bonn's Centre for Advanced Security, Strategic and Integration Studies, said many French people do not yet grasp the seriousness of the situation. “The euro has made it easier for France to access cheap financing and has long softened the pressure to adjust,” he told DW. In the past, currency devaluations of the French franc made economic imbalances felt through declining purchasing power and rising prices. “Today, that warning signal is missing. This has created the illusion that necessary adjustments can be postponed indefinitely,” Charrier said.
The rising cost of debt is also affecting Germany. Heinemann has calculated that German interest payments are likely to triple within a few years, exceeding €90 billion for the federal government alone, with €100 billion "no longer far off."
Analysis
Why This Matters
- Rising French borrowing costs could spread to other eurozone economies, raising the risk of a broader debt crisis similar to 2011.
- Higher interest payments mean less money for public services and investment, directly affecting French citizens.
- The political standoff between centrist government and radical opposition leaves investors uncertain about future fiscal policy, increasing volatility in European bond markets.
Background
France has run budget deficits every year since 1974, accumulating a debt-to-GDP ratio of about 120%, nearly double Germany's 65%. The current government, led by President Emmanuel Macron, lacks a parliamentary majority and faces nationwide protests. The euro has long allowed France to borrow at low rates, but investor confidence has eroded as political instability and costly promises have increased.
Key Perspectives
Friedrich Heinemann (ZEW economist): Warns that the rising spread is a "fever gauge" that could lead to a financial crisis unless France changes course. Calls the promises of radical parties "economic fairy tales" that avoid the need for painful consolidation.
Landry Charrier (University of Bonn researcher): Argues that many French people do not feel the consequences of debt because they receive more in government benefits than they pay in taxes, and the euro has removed the immediate warning signals that currency devaluations once provided.
What to Watch
- Whether France's interest payments exceed €91 billion in 2027 as projected, and whether they approach €130 billion by 2030.
- The trajectory of the spread over German bonds: a continued rise could force a change in fiscal policy or trigger a crisis.
- Political developments, especially the 2027 presidential election and whether centrist or radical parties prevail, shaping future fiscal direction.
Checked
12 claims in this story checked against 1 source: 12 supported.
Show each claim
- SupportedFrance’s rising debt costs threaten stability, and its risk premium is at its highest level since the financial crisis.DW English: “The risk premium over German government bonds, known as the spread, is now at its highest level since the financial crisis.”
- SupportedInterest payments on France’s total public debt are projected to exceed €90 billion by 2027.DW English: “That figure is projected to exceed €91 billion in 2027”
- SupportedFrance’s public debt is around 120% of GDP and is pushing up borrowing costs.DW English: “France's public debt stands at around 120% of gross domestic product (GDP). [...] As a result, the French government must pay higher interest rates on its borrowing than Berlin.”
- SupportedThe spread has more than doubled since June 2026 and is now at its highest level since the financial crisis.DW English: “The risk premium over German government bonds, known as the spread, is now at its highest level since the financial crisis. [...] Since June 2026, the spread over German government bonds has more than doubled.”
- SupportedHeinemann called the spread a “fever gauge” for bond markets.DW English: “The spread acts as a kind of "fever gauge" for bond markets, explained Friedrich Heinemann”
- SupportedHeinemann said that if the spread rises too sharply, French financing conditions come under pressure, borrowers face higher interest rates, and banks can get into trouble.DW English: “"If the spread rises too sharply, France's financing conditions come under pressure, and anyone in France who needs a loan has to pay higher interest rates. Banks then get into trouble, and the crisis escalates further," Heinemann told DW.”
- SupportedHeinemann said the situation could slide toward a financial crisis and a genuine economic collapse.DW English: “"This could then slide toward a financial crisis, which would finally send a clear signal to everyone: Things cannot continue like this unless you are prepared to risk a genuine economic collapse," he said.”
- SupportedFrance is expected to pay more than €79 billion in interest on total public debt in 2026, more than €91 billion in 2027, and potentially €125 billion to €132 billion by 2030.DW English: “France is expected to pay more than €79 billion in interest on its total public debt in 2026. That figure is projected to exceed €91 billion in 2027 and could reach between €125 billion and €132 billion by 2030.”
- SupportedMélenchon suggested that French central-bank-held government bonds should be “thrown into the fire,” saying “nobody will ever notice they've disappeared.”DW English: “Jean-Luc Melenchon, LFI's leader, has even suggested that government bonds held by the French central bank should be "thrown into the fire." "Nobody will ever notice they've disappeared," he has claimed.”
- SupportedHeinemann called the positions of radical parties on the left and right “economic fairy tales.”DW English: “For Heinemann, this is "a good example of radical parties on both the right and the left simply telling economic fairy tales."”
- SupportedCharrier said the euro has made it easier for France to access cheap financing and has long softened pressure to adjust.DW English: “"The euro has made it easier for France to access cheap financing and has long softened the pressure to adjust," he pointed out.”
- SupportedCharrier said the missing warning signal has created the illusion that necessary adjustments can be postponed indefinitely.DW English: “Today, that warning signal is missing. This has created the illusion that necessary adjustments can be postponed indefinitely," Charrier said.”