France’s borrowing costs have risen above 5% for the first time in 24 years, as political uncertainty and the government’s failure to agree a long-delayed budget unsettle the financial markets. With some public buildings still smouldering from recent riots, a fresh wave of selling pushed up the yield – or interest rate – on bonds issued by the eurozone’s second-largest economy. The yield on the benchmark 10-year bond – known as the obligation assimilable du Trésor (OAT), issued by the French Treasury – rose more than 8 basis points to 5% in morning trading before easing to 4.99%. The French government has yet to pass its budget for next year, and the country has been shaken by increasingly violent street protests in recent weeks. What began in September as students calling for extra funds to deal with mould- and rat-infested schools, teacher shortages and large class sizes grew into wider demonstrations about the rising cost of living. Initially peaceful protests were often met with aggressive police tactics, sparking riots in many towns and cities. Stores such as Louis Vuitton have been looted, and protesters set fire to the town hall in Limoges. No single party has had overall control of parliament since President Emmanuel Macron called a snap election in 2024. The parliamentary deadlock has blocked his plans to raise the pension age from 62 to 64 and a series of measures designed to cut or redirect state spending. France’s budget deficit was 5.1% of GDP in 2025, while its debt stood at 115.6% of GDP. Forecasts show both the deficit and debt rising in the current financial year without corrective action. International lenders have become increasingly reluctant to lend to Paris, accusing the government of becoming “fiscally incontinent”. Some have stopped lending to France – notably Japanese fund managers – and those that remain are demanding a higher price for their loans, especially longer-term ones. Matthew Ryan, head of market strategy at the currency trading and payments platform Ebury, said France’s troubles were also dragging down the value of the euro against other major currencies. “The euro continues to lag most major currencies as the political risk premium in France looks unlikely to fade any time soon,” he said. “It remains unclear whether the 2027 budget will clear parliament, and even if it does, it seems set to be so riddled with concessions to both the left and the right that the deficit problem is left insufficiently addressed.”
Frequently Asked Questions
FAQs French Borrowing Costs Hit 24Year High
1 What does it mean that French borrowing costs hit a 24year high
It means the interest rate France pays on its government debt rose to its highest level since around 2001 In other words investors are demanding more money to lend to France
2 What are borrowing costs for a country
Theyre the interest rates a government pays when it borrows money by selling bonds Higher costs mean the government spends more just to service its debt
3 Why are French borrowing costs rising now
Two main reasons political turmoil and civil unrest which make investors nervous and worries about Frances budget deficit and debt levels When investors see risk they demand higher interest
4 What is a bond yield and how is it different from a borrowing cost
A bond yield is the return investors get on a government bond When bond prices fall yields rise Higher yields directly translate into higher borrowing costs for the government when it issues new debt
5 How is this linked to civil unrest
Unrest signals instability Investors worry that protests or strikes could disrupt the economy or force the government into costly spending so they charge more to lend
6 What budget concerns are driving this
France has been running large deficits and its debt is high relative to the size of its economy Markets worry the government isnt doing enough to bring spending under control
7 Why does this matter for ordinary people
Higher government borrowing costs can push up mortgage rates business loan rates and other borrowing costs across the economy They can also squeeze public finances potentially leading to spending cuts or tax pressure
8 What is the spread and why do people talk about it
The spread is the gap between French borrowing costs and those of a benchmark like Germany A widening spread shows investors see France as riskier than its neighbors
9 How does this compare with the eurozone debt crisis
During the 20102012 crisis countries like Greece Italy and Spain saw borrowing costs spike dramatically Frances rise is notable but smaller in scale though a 24year high is still a warning sign
10 What are the benefits if any of higher borrowing costs
There arent many for the government but higher yields can attract investors seeking better returns and
