France’s Debt Crisis: Why Paris Is Borrowing at 2002 Prices and Why the Rest of Europe Should Care
France's 10-year borrowing cost has broken 5% for the first time since 2002, its gap with Germany is the widest since the euro crisis of 2011, and the presidential election is only months away. What a French bond scare means for the euro, for Serbia and for ordinary savers.
Коротко
Not yet, but markets are charging France more than at any time since 2002. The 10-year yield rose above 5% in October, the spread over Germany passed 150 basis points, the widest since late 2011, and public debt is forecast at 119.3% of GDP this year. France's size makes it a test for the whole euro, and a weaker euro or tighter credit would reach Serbia through trade, loans and investment.
On 2 October, for a few hours, the French state paid more than 5% to borrow money for ten years. The last time that happened, the euro was still new in people’s wallets and the year was 2002, Trading Economics noted. Three weeks later it happened again.
A bond yield is a dry number. This one is a verdict. It tells you what investors think of a government’s ability to pay its bills, and in France’s case they are worried.
What is happening in Paris
The facts are simple and uncomfortable. France’s public debt was 115.7% of GDP in 2025 and is forecast to reach 119.3% this year and 121.7% in 2027, the highest since 1978, according to finance ministry projections reported by Brussels Signal. The deficit is expected at 5.4% of GDP in 2026, far above the EU ceiling of 3%. France has been under the EU’s excessive deficit procedure since 2024.
Prime Minister Sébastien Lecornu, who leads a minority government, has presented a 2027 budget with unpopular spending cuts meant to bring the deficit to 5%. The country’s independent fiscal watchdog called its economic assumptions “optimistic”. To cover the deficit and roll over old debt, the treasury agency Agence France Trésor plans to borrow a record €340 billion next year.
Markets have responded the way markets do: by asking for more. The gap between French and German 10-year yields has widened beyond 150 basis points, the widest since late 2011, at the height of the euro crisis.
| France in numbers | |
|---|---|
| 10-year bond yield | above 5% (2 October and again on 21 October), highest since 2002 |
| Spread over Germany | more than 150 basis points, widest since late 2011 |
| Public debt | 115.7% of GDP (2025), forecast 119.3% (2026), 121.7% (2027) |
| Budget deficit | 5.1% of GDP (2025), forecast 5.4% (2026), target 5% (2027) |
| EU limits | 3% deficit, 60% debt |
| Planned borrowing in 2027 | record €340 billion |
| Next presidential election | spring 2027 |
Sources: Trading Economics; Brussels Signal, citing French finance ministry projections.
Why the election makes it worse
Debt alone rarely frightens markets. Debt plus political uncertainty does. France votes for a new president in spring 2027, and polls favour Marine Le Pen, whose party has in the past promised higher spending and a tougher line with Brussels. Investors do not know which budget France will have in 2028, so they demand compensation now.
The European Central Bank has noticed. Christine Lagarde’s decision to leave the ECB early lets EU leaders choose her successor while Emmanuel Macron is still president. Economists read that as a precaution against a French election that could change the balance in Brussels.
Is France the next Greece?
The comparison is everywhere, and it is mostly wrong. Greece in 2010 was a small economy that had misreported its statistics and could no longer borrow at all. France is the euro area’s second-largest economy, borrows easily even at 5%, and owns deep domestic savings. Its problem is not access to money but the price of it, and the political will to stop the debt from growing faster than the economy.
The more useful comparison is Italy in 2011 or the British gilt crisis of 2022: a moment when a large, rich country discovers that markets will not wait for the next election. The ECB has a tool for this, the Transmission Protection Instrument, which allows it to buy a country’s bonds if their yields rise for reasons it judges unjustified. Using it for France would be a political event in itself, because the bank would be judging whether French policy deserves support.
What it means outside France
For the euro. If investors see France as a weak link, they sell French bonds and sometimes the euro with them. A weaker euro makes imports priced in dollars, above all oil and gas, more expensive for everyone who uses euros or a currency tied to it.
For your loan. Higher French yields push up borrowing costs across Europe, because banks price loans off government bonds. Combined with an ECB that is already signalling higher rates, that is more pressure on euro-indexed loans.
For Serbia. The European Union is Serbia’s largest trading partner and source of investment, and the dinar is kept close to the euro. A French slowdown or a period of tighter European credit would reach Serbian exporters and borrowers through orders, financing costs and investment decisions. There is no direct French debt risk for Serbian savers, but there is a wider European one.
What comes next: three scenarios
Budget passes, markets calm. Lecornu’s cuts survive parliament, the watchdog’s doubts fade and yields drift back below 5%. The election risk remains but stops dominating.
Budget stalls, slow pressure. The government survives but its cuts are diluted. Spreads stay wide, rating agencies weigh downgrades and France pays more each month on its new borrowing.
A market accident. A failed vote, a downgrade or an election shock pushes yields sharply higher, the ECB has to decide whether to intervene, and the euro takes the strain.
These are scenarios, not forecasts. What would change them: the parliamentary vote on the 2027 budget, rating agency reviews and any ECB statement on France.
Frequently asked questions
Why are French bond yields rising?
Because public debt is close to 120% of GDP, the deficit is far above EU limits, the 2027 budget’s assumptions are disputed and the 2027 presidential election adds political uncertainty. High energy prices and inflation are pushing yields up worldwide as well.
How high is the French 10-year yield?
It rose above 5% on 2 October and again in late October 2026, its highest level since 2002.
Is France going bankrupt?
No. France can still borrow easily; it is paying more to do so. The risk is that debt keeps rising faster than the economy.
What is the French-German spread?
The difference between French and German 10-year yields. It has widened beyond 150 basis points, the widest since late 2011.
Can the ECB help France?
It has the Transmission Protection Instrument, which allows it to buy bonds if yields rise for unjustified reasons, but using it would be politically sensitive.
How does France’s debt crisis affect Serbia?
Indirectly, through the euro, European credit conditions and demand from the EU, Serbia’s main trading partner.
