Amid protests, France's rising debt costs threaten stability

France's escalating debt costs and precarious political situation have become the defining aspects of the country's current predicament. In response to nationwide protests, the government has pledged €4 billion for school renovations by 2030 and an additional €1 billion for universities by 2029. However, France's public debt currently stands at around 120% of gross domestic product (GDP), a figure that is significantly higher than Germany's 65% debt-to-GDP ratio, despite Germany's €600 billion infrastructure and defense investment package.

While Germany maintains the highest possible AAA credit rating, France's rating ranges from AA to A+ or Aa3, depending on the credit agency. The French government now faces higher borrowing rates than Germany, with a risk premium over German government bonds, or the spread, at its highest level since the financial crisis. This spread currently costs France nearly 1.6 percentage points more in interest than Germany on 10-year bonds.

Economist Friedrich Heinemann from the Leibniz Center for European Economic Research warns that if the spread increases sharply, France's financing conditions could deteriorate, leading to higher interest rates for all borrowers and exacerbating the crisis. Researcher Landry Charrier from the University of Bonn's Center for Advanced Security, Strategic and Integration Studies suggests that despite awareness of the high public debt, many French citizens are not directly impacted by its consequences.

The majority receive more in government benefits and services than they pay in taxes and social contributions. Since 1974, France has not balanced its national budget, and the last time it did so was during the eurozone debt crisis in 2011. The risk premium has more than doubled since June 2026 due to high debt levels, political instability, large budget deficits, and recent protests.

French interest payments are projected to exceed €79 billion in 2026, €91 billion in 2027, and potentially between €125 billion and €132 billion by 2030. Heinemann emphasizes that if the spread continues to rise, France's financing conditions could deteriorate, leading to higher interest rates for all borrowers and further exacerbating the crisis.