France's borrowing rate keeps rising, hitting its highest level since 2002

France's borrowing rate continues to climb, reaching its highest level since 2002. The ten-year borrowing rate reached 4.94% at 10 a.m. on Thursday, October 1st, up from 4.85% the previous day. This marks the largest quarterly increase in almost four decades and the sharpest monthly rise since 2022. French government bonds on the secondary market had previously yielded a similar rate in 2002.

The rise in borrowing costs reflects growing investor mistrust in French debt, as the government presents the outline of the potential 2027 state budget. This task is particularly challenging for Prime Minister Sébastien Lecornu, who has not faced a balanced budget since 1973. The rise in borrowing costs is attributed to energy tensions and political uncertainty ahead of the presidential election.

This record surge in borrowing costs is a cause for concern, as it reduces the resources available for the country's priorities, affecting the government, parliament, and presidential candidates. The gap between France and Germany, whose borrowing rate serves as a benchmark, has widened to its highest level in 14 years, with Germany's rate at 3.61% compared to France's 4.94%.

The mounting debt burden is a significant issue, with public debt reaching €3.596 trillion, equivalent to 119% of gross domestic product (GDP). This has become one of the main concerns ahead of the presidential election. One proposal to address the debt issue, suggested by La France insoumise candidate Jean-Luc Mélenchon, includes cancelling French government bonds held by the European Central Bank.

However, this idea was rejected by Christine Lagarde, president of the European Central Bank, as it would violate EU treaties.