Financeupdated 34m ago3 min read
France’s Borrowing Costs Overtake US as Protests, Gridlock Block Macron’s Budget
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French 10-year yield gap to Germany widens to record levels amid budget turmoil. Investors fret France cannot pass the budget, raising debt-risk and prompting selling.
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French bond turmoil
France’s borrowing costs kept rising as investors worried that France’s government was struggling to pass a federal budget after public protests gripped the country. The difference between French and German 10-year borrowing costs rose to its highest level in almost 15 years, and the yield on the French 10-year bond rose by nine basis points to 5.089% in early trading on Thursday. The move lifted France’s 10-year borrowing costs over the equivalent for US Treasury bonds for the first time since 2013, while the volatility came as the French government struggled to pass a budget for next year.
The interior ministry said there had been nearly 2,400 arrests, and a parliamentary gridlock blocked plans by President Emmanuel Macron to increase the state pension age from 62 to 64 and rein in state spending. Jim Reid of Deutsche Bank said the sell-off in French government bonds was starting to ripple out to other countries, with the Italian 10-year spread over German bonds widening 3.8 basis points to 116 basis points and Spain’s widening 3.1 basis points to 66 basis points.
Debt snowball fears
The BBC framed France’s market stress as a possible “debt “snowball effect”,” describing how France’s risk premium has risen substantially since the start of September 2026.
Finance Minister Roland Lescure told the National Assembly that France is not trapped in a “snowball” of debt, while the governor of the Bank of France, Emmanuel Moulin, said two weeks ago that the country does not yet need the help of the European Central Bank (ECB).
The BBC also reported that the Ministry of Economy and Finance admitted it has reduced the sale of bonds with maturities of more than 30 years due to lower investor demand.
Economics professor Jagjit S. Chadha explained to BBC Mundo that “when you have a high level of debt, you have to pay a large amount of interest on that debt.”
The BBC warned that if investors perceive trouble paying principal and interest, interest rates could rise and a growing share of what the state collects in taxes could go to debt service rather than public services.
Protests, spending limits
France’s protests and curfews intersected with the country’s fiscal constraints, as the BBC described curfews imposed to put an end to looting and vandalism that had taken over since the past weekend. The Guardian said the French government struggled to pass a budget for next year while recovering from protests that turned violent last weekend, and it tied the bond sell-off to that budget turmoil. France 24 reported that Elon Musk threatened Democrats who want to investigate alleged corruption and his role in the US government if they win control of Congress next month, writing on X: “Those who pick fights with me should understand that I will find out who is really pulling the strings and come for them, not just their puppets.”
The Independent en Español said France’s public debt as a share of gross domestic product surged during President Emmanuel Macron’s tenure and became a defining issue ahead of the contest to succeed him next spring. Carsten Brzeski of ING said “France is not Greece,” while the Independent en Español added that France’s inability to meet its spending and growth targets, as well as cost-cutting goals, sits at the core of its economic problems.