France is facing growing pressure from financial markets as the cost of servicing its enormous public debt continues to rise.
The problem is not simply the size of the debt, but the combination of high borrowing requirements, weak economic growth, political uncertainty and increasingly expensive interest payments.
France’s debt
France’s public debt is expected to reach around 118% of GDP in 2026, rising above 120% in 2027, according to the European Commission.
Meanwhile, the budget deficit is forecast to remain at around 5.1% of GDP this year, well above the European Union’s 3% limit.
Investors are now demanding higher returns to hold French government bonds. The yield on the benchmark 10-year French OAT recently moved above 4%, reaching levels not seen since the late 2000s.
Yields
At the end of August 2026, the yield remained around 4.1%, while the equivalent German Bund was closer to 3.25%.
That difference matters. The wider the gap between French and German borrowing costs, the greater the risk premium investors are demanding from Paris.
France’s spread has recently approached 90 basis points, reflecting concerns over its fiscal position and political uncertainty ahead of next year’s presidential election.
Danger signs
The danger is a potential “debt snowball”. As older, cheaper bonds mature, France must refinance them at today’s higher rates.
Interest payments therefore consume an increasing share of government revenue, potentially forcing Paris to borrow even more.
The European Commission reportedly expects French interest payments to rise from 2.2% of GDP in 2025 to 2.6% in 2026 and 2.8% in 2027.
France is not facing an immediate sovereign default, but markets are clearly demanding greater fiscal discipline.
The crucial question is whether politicians can agree on spending cuts and tax measures before rising interest costs become a much larger problem.