Is France in a Debt Crisis?

In September 2026, the yield on France’s ten-year government bond exceeded Germany’s by 97 basis points, the widest monthly average gap since July 2012.

France carries the largest public debt in the euro area by amount. The yield premium comes with persistent deficits and a legislature with no absolute majority.

France’s Debt Problem

France’s borrowing cost has spiked. Its ten-year yield, as a monthly average, jumped 44 basis points in September, a sharper rise than Germany’s. The ten-year spread is how markets price French credit risk: both governments borrow in euros under one central bank, so the spread reflects how lenders judge each of them.

Plot euro-area ten-year yields against credit ratings and the countries broadly line up in order: the better the rating, the less a government pays. France is the clear exception.

Exhibit 1

France is a large economy with a major debt. It is the euro area’s second-largest economy, after Germany. France’s debt stood at 119% of its GDP at the end of June 2026, according to INSEE, France’s statistics office.

France’s public sector spends more than it collects, even before it pays interest on its debt. In 2025 the average interest rate on that debt, 2.02%, moved above nominal GDP growth of 1.90%. Put the two together and the debt grows faster than the income that pays for it.

Yields are rising alongside a massive total debt stock. However, France is not in a debt crisis yet!

Not a Crisis Like 2012

The euro crisis turned on one question: would anyone stand behind the weaker governments? Today there is an answer: the European Central Bank has two backstops. They are Outright Monetary Transactions, created in 2012, and the Transmission Protection Instrument, added in 2022. Neither has ever been used, and both come with conditions on a country’s public finances.

France still finds buyers for its bonds. The euro area’s central banks have stopped buying, and the French public-sector bonds they hold from their purchase programmes are down 28% since the end of 2022.

Investors outside France filled the gap: they held 55.9% of the long-term debt securities issued by French public administrations at the end of March 2026, up from under half at the end of 2021.

The premium is wide by France’s standards, but it is a fraction of what Italy and Spain paid in the euro crisis. Their gaps over Germany, as monthly averages, went above 500 basis points in 2011 and 2012.

What makes France’s debt problem worse is its politics.

The Problem Is Politics!

No French government has had an absolute majority in parliament since June 2022. Without one, every budget depends on parties outside the government. Five prime ministers have held office since then, and the National Assembly censured one government.

Budgets have stalled. The Assembly rejected the first part of the budget bill two years running, and both years ended with special laws just to keep collecting taxes. Meanwhile the deficit was still 5.1% of GDP in 2025, a year in which the economy grew.

Investors now price France next to Italy, not Germany. From 2015 to 2021, before the majority was lost, France’s ten-year yield averaged less than 50 basis points above Germany’s each year. Today France pays as much as Italy to borrow for ten years, though Italy owes more for the size of its economy and has a lower rating from all three major agencies.

S&P downgraded France’s credit rating to A+ in October 2025. The agency told the French Senate that the run of censure motions was liable to hinder fiscal consolidation and policy continuity.

The run-up to the presidential election, due in 2027, adds to the political pressure.

France’s rising borrowing cost is partly an economic problem and partly a political one.