The deterioration of French public finances is now being directly reflected in the markets. This Tuesday, the yield on the French ten-year government bond reached levels not seen since the financial crisis, while France is now borrowing at a higher cost than Italy and Greece , two countries long considered the fiscal underachievers of the eurozone.
Investors are making France pay more.
According to the French Treasury Agency, the benchmark 10-year bond yield stood at 4,52% on Tuesday. The spread with Germany , the eurozone benchmark, widened to around 99 basis points. This development reflects investor concerns about the French budget situation, as well as economic and political uncertainties just months before the presidential election.
The comparison with Italy and Greece is particularly symbolic. For years, these two countries had to pay a significantly higher risk premium than France to borrow. This hierarchy has now been reversed in the markets.
The debt bill continues to climb.
This rise in interest rates comes at a time when the government must regularly refinance a portion of its enormous debt. The higher the interest rates on new bonds, the more the interest burden gradually increases in the budget.
The recent rise in interest rates could thus increase the interest bill by several billion euros this year alone. Following Bruno Le Maire 's warnings about the seriousness of the public finance situation, the markets are in turn sending a signal: the cost of French debt is becoming one of the country's main economic problems.
