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France's borrowing costs near 2008 highs amid persistent fiscal strain and political deadlocks

Rising public debt, economic stagnation, and political fragmentation drive French bond yields higher as the country prepares to submit its next budget.

Updated Aug 31, 2026 · 05:24 UTC1 reports

The short version

  • France's 10-year government bond yields reached levels above 4.13% last week—near 2008 highs—as investors weigh high public spending and stalled political reforms.
  • The country's deficit reached 5.1% of GDP last year while debt surpassed 115%, exceeding the European Union's statutory limits of 3% and 60% respectively.
  • The French government faces an early October deadline to submit its 2027 budget proposal to a divided National Assembly, with major fiscal decisions complicated by the approaching 2027 presidential election.

Key facts

  • French 10-year government bond yields surged past 4.13% last week, marking borrowing costs near their highest points since 2008.[CNBC]
  • France recorded a budget deficit of 5.1% of GDP last year and a debt-to-GDP ratio above 115%, violating EU reference limits of 3% and 60%.[CNBC]
  • The International Monetary Fund projected in July that France's gross government debt will reach approximately 118.5% of GDP in 2026 and exceed 120% in 2027.[CNBC]
  • France's gross domestic product contracted by 0.2% in the first quarter of the year and stagnated during the second quarter.[CNBC]
  • The European Council has recommended under the EU's excessive deficit procedure that France correct its deficit by 2029.[CNBC]
  • France is expected to present its 2027 budget plans to parliament by early October.[CNBC]

What remains uncertain

  • Financial market analysts express skepticism over whether French political leaders will enact sufficient spending reductions to stabilize debt trajectories ahead of the 2027 presidential election.[CNBC]
  • Rates strategists note that global macroeconomic factors, extreme weather disruptions, and ongoing war-related pressures create uncertainty surrounding France's ability to achieve a credible medium-term fiscal stabilization path.[CNBC]

Sources