The extra yield investors demand to hold French 10-year government bonds over German Bunds of the same maturity pushed past 110 basis points this week and stood at 113 basis points on Thursday afternoon, GlobalCapital reported on 24 September. That is the widest gap since the eurozone sovereign debt crisis of 2012. The spread had started the year at 82 basis points and narrowed to 63 basis points at the end of June, so the move of the past weeks is both abrupt and, for a benchmark sovereign, symbolically significant.
The repricing comes against a deteriorating fiscal baseline. At the end of the first quarter of 2026, French public debt under the Maastricht definition stood at EUR 3,536.1 billion, equal to 117.5 percent of GDP, the highest ratio in the euro area behind Greece (137 percent of GDP) and Italy (137 to 139 percent), according to Insee figures cited by BFM Business. On 19 September the Ministry of Economy and Finance in Paris published a revised trajectory: debt at 119.3 percent of GDP in 2026 and 121.7 percent in 2027, the highest levels since 1995, with the public deficit now expected at 5.4 percent of GDP this year against an initial 5.0 percent target, after 5.1 percent in 2025. The ministry attributed 0.3 percentage points of that 0.4-point slippage to successive shocks — the war in the Middle East and droughts — that reduced growth and therefore tax revenue, and 0.1 point to the return of inflation and to higher state borrowing costs. France currently issues at around 4.56 percent, roughly one percentage point above Germany, according to BFM.
Three channels carry a wider spread into the public accounts. First, every new OAT sold at a higher yield progressively replaces paper issued when rates were far lower, so debt service costs rise even before the stock of debt does. Second, as GlobalCapital notes, demand for French paper has been struggling to keep pace with supply. Third, the political calendar narrows the room for manoeuvre: Prime Minister Sébastien Lecornu must try to pass the 2027 budget through a bitterly divided National Assembly, as his three predecessors each failed to do. He has announced EUR 54 billion of savings for the 2027 finance bill, arguing that without them the deficit would approach 6.5 percent of GDP in 2027; the government targets 4.8 percent excluding new military spending and 5 percent including it, and still aims to reach 3 percent in 2029.
