Amid protests, France's rising debt costs threaten stability

France faces a mounting debt crisis amid nationwide protests, with the government promising €5 billion in low-interest loans to renovate schools and fund universities by 2030 and 2029 respectively. France's public debt stands at 120% of its GDP, compared to Germany's 65%, despite Germany's €600 billion infrastructure and defense investments.

France's credit rating is AA, A+ or Aa3, while Germany enjoys the highest AAA rating. The French government must pay higher interest rates on borrowing than Berlin, with the risk premium over German bonds now at its highest since the financial crisis, standing at 1.6 percentage points. Economist Friedrich Heinemann warns that as the spread rises sharply, France's financing conditions could come under pressure, leading to higher interest rates for everyone.

French researcher Landry Charrier believes the debt-fueled spending spree will continue, as many French citizens are unaware of the high public debt and its consequences. France has regularly spent more than it collects in tax revenue since 1974, with the last balanced budget in 1974. The central government's interest bill is projected to reach €79 billion in 2026, €91 billion in 2027, and between €125 billion and €132 billion by 2030.

This will force France to refinance large amounts of outstanding bonds at higher interest rates while maintaining a substantial budget deficit.