France’s Borrowing Costs Rise as Debt Tops EUR 3.5 Trillion, OECD Warns of 203% Debt-to-GDP by 2050

According to Lianhe Zaobao citing Reuters, France’s borrowing costs are rising as investors and economists warn that political infighting ahead of next year’s presidential election and stalled fiscal reforms could worsen the country’s debt dynamics, with public debt already above EUR 3.5 trillion. OECD Secretary-General Mathias Cormann said France’s public debt could reach 203% of GDP by 2050 if no action is taken, underscoring the need for strict budget discipline.

Official data show France’s public debt exceeded EUR 3.5 trillion in the first quarter, equal to 117.5% of GDP, near pandemic-era levels. France’s audit court said France is the only euro zone country that has not reduced its debt burden from post-pandemic highs. France’s interest bill on public debt totaled EUR 66 billion last year and could approach EUR 100 billion by 2029, the audit court warned. Moody’s forecasts that debt ratios will deteriorate further across the UK, France, Germany, Italy and Spain, with France seeing the largest increase in interest costs relative to public debt.

Since a snap parliamentary election in 2024 produced a hung parliament, several minority governments have fallen while trying to pass budgets, keeping pressure on French government bonds. As the government prepares to push through the 2027 budget this fall, investors’ risk premium for holding French debt over German bunds has returned to highs seen after pension reform was paused last October, and has exceeded the Italy-Germany spread. Morgan Stanley last week advised clients to reduce exposure to French debt due to fiscal concerns, and economists expect elevated volatility in France’s bond market ahead of next year’s presidential election.