French bond yields near 2008 highs as debt and budget risks mount
France is facing significant economic instability as government bond yields reach levels not seen since the 2008 financial crisis. Political deadlock and persistent budget deficits have created a challenging fiscal environment for the nation.
Why it matters
As the EU's second-largest economy, France's fiscal health has major implications for the stability of the Eurozone and global bond markets.
France's deteriorating public finances and political deadlock are becoming a growing concern for bond investors, with borrowing costs near financial-crisis-era highs as another difficult budget battle looms.
The European Union's second-largest economy has endured recurring political instability and mounting fiscal strain in recent years. It has repeatedly broken European Commission rules on budget deficits and debt limits, and successive prime ministers have been ousted after failed attempts at reform, spending cuts and tax rises to bring the situation under control.
France is subject to the EU's excessive deficit procedure , with the Council recommending that it end its excessive deficit by 2029 — but it has a long way to go.
EU treaties set reference values of 3% of GDP for government deficits and 60% for government debt. Last year, France's deficit reached 5.1% of GDP, while the debt-to-GDP ratio surpassed 115%.
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