France’s borrowing costs climb to highest level since 2002
France’s borrowing costs have risen to their highest level in 24 years, increasing pressure on the government as it sets out plans to tackle the country’s growing public debt and budget deficit.
The yield on France’s 10-year government bonds climbed as high as 4.96% on Thursday, 1 October, a level not seen since 2002, before easing slightly to around 4.92% on Friday morning.
Listen to this article
The rise means France faces higher costs to service its debt, leaving the government with greater pressure to reduce spending or raise revenue as it prepares its 2027 budget.
France’s public debt currently stands at around €3.596 trillion, equivalent to 119% of GDP.
The government plans to borrow a record €340 billion next year.
Pressure grows ahead of 2027 budget
The government has outlined plans for €43 billion in new savings as it seeks to reduce the budget deficit from 5.4% of GDP this year to 5% in 2027.
Investor concerns have also been reflected in the widening gap between French and German borrowing costs.
The difference between the two countries’ 10-year yields rose above 140 basis points this week, its widest level since 2012.
Finance Minister Roland Lescure has sought to reassure investors that France remains a reliable borrower.
However, the country’s fiscal watchdog has described the government’s 1% growth forecast for 2027 as optimistic and considers a return below the EU’s 3% deficit limit by 2029 very unlikely.
Prime Minister Sébastien Lecornu has also warned that rising interest payments leave fewer resources available for other government priorities.
Bond markets steady on Friday
The pressure on France came as government borrowing costs rose sharply across several major economies on Thursday.
UK 30-year bond yields climbed above 6% for the first time since 1998, while US borrowing costs also reached multi-decade highs.
Bond markets steadied on Friday morning as oil prices fell, helping to ease some concerns about persistent inflation and further interest rate increases.
However, inflation remains another source of pressure in Europe, with eurozone inflation rising to 3.8% in September, up from 3.2% in August and remaining above the European Central Bank’s 2% target.