France's financial situation is drawing comparisons to Greece's 2010 debt crisis, particularly concerning its bond market. The premium France pays to borrow on its 10-year bonds over Germany's has surged to over one percentage point, reaching its highest level since 2012. This indicates significant investor unease with France's stretched finances and the increasing cost of its debt, which has risen faster than any other developed economy during recent global bond selloffs.
Several factors contribute to this concern. France's public debt stood at 117.6% of annual output at the end of the first quarter, projected to climb above 120% by 2027. This contrasts sharply with Greece, whose debt-to-GDP ratio fell by 9.4 percentage points over the previous twelve months and is forecast to continue decreasing. Moreover, France ran a budget deficit of 5.1% last year, one of the widest in the EU, while Greece closed with a surplus of 1.7% of GDP.
Investors are also wary of France's high bond issuance plan, with €310 billion of medium and long-term bonds expected in 2026, significantly more than Greece's planned €8 billion. The cost of servicing this debt is substantial, with interest payments projected to reach €65 billion this year, potentially rising to €100 billion by 2029. Despite France's larger and more diversified economy, deeper markets, and higher credit standing compared to Greece in 2012, the direction of its rising debt and political deadlocks are prompting investors to demand greater compensation.
