French borrowing costs hit 24-year high as civil unrest and budget fears spook markets
Yield on 10-year government bonds passes 5% amid failure to pass budget and fallout from violent street protests Business live – latest updates France’s borrowing costs have climbed above 5% for the first time in 24 years as political concerns and the government’s failure to agree a much-delayed budget spook the financial markets. With some civic buildings still smouldering from recent riots,a…
France's borrowing costs reached a 24-year high of 5% due to political gridlock and budget fears, as the country's financial markets were unsettled by recent events. The yield on 10-year government bonds, known as Oat, surged past 5% following the government's inability to pass its budget and amid civil unrest. The political stalemate, which has seen no single party hold overall control since Emmanuel Macron's 2024 snap election, has blocked initiatives like raising the pension age and reducing state spending.
The country's budget deficit is projected to remain at 5.1% of GDP in 2025, with debt piling up to 115.6% of GDP. This lack of action has led international lenders to become increasingly reluctant to lend to France, accusing the government of fiscal irresponsibility. Some lenders, such as Japanese fund managers, have even withdrawn from lending altogether, demanding higher rates for their loans.
The political uncertainty has also caused the euro to weaken, with Matthew Ryan, head of market strategy at Ebury, stating that France's political risk premium appears unlikely to diminish anytime soon.
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