France’s debt has entered a phase requiring heightened vigilance. Public debt at 119 per cent of GDP, a deficit still exceeding 5 per cent in 2026, rising bond yields and a sharp increase in the debt service burden are all signs of a deteriorating situation. However, can we already speak of a debt crisis? At present, France continues to borrow on the markets and the Agence France Trésor’s bond auctions remain well oversubscribed. The real issue now is the cost and credibility of its financing.

A costly debt to refinance

French public debt stood at 3,595.5 billion euros at the end of the second quarter of 2026, representing 119 per cent of GDP. It rose by nearly 60 billion euros in the second quarter alone. The relatively long maturity of the debt acts as a buffer, as the entire debt does not have to be refinanced at the new rate as soon as interest rates rise. The problem is a gradual one, as each new issue is currently taking place at a higher cost than the previous one. This dynamic is impacting the budget, as the debt service cost is expected to exceed €79 billion in 2026 and reach around €91 billion in 2027, according to government forecasts. It would thus become one of the government’s top expenditure items.

What market participants are saying

It is on the bond market that the shift in perception is most evident. In early October, the yield on the French 10-year OAT approached 5 per cent, a level not seen since the early 2000s. At the same time, the ‘spread’ – the difference compared with Germany – briefly exceeded 150 basis points. This does not mean that France can no longer find lenders. At the end of September, Agence France Trésor reported that, since the start of the year, demand for purchases had been 3.5 times the amounts offered on short-term issues and 2.5 times those offered on medium- and long-term issues. France therefore retains effective access to the market. That is why, today, the question is not whether France can borrow, but at what cost.

Who are the investors?

The structure of the debt is another important point. At the end of March 2026, foreign investors held just over 57 per cent of the debt, French banks held 10.5 per cent and French insurers 9.5 per cent, according to data from Agence France Trésor. This international presence means that investor confidence is by no means negligible. There is talk of a withdrawal by certain foreign investors, notably Japanese ones. With rising interest rates affecting many countries, the increase in the risk premium is leading to greater selectivity.

A warning

The situation in France therefore warrants particular vigilance, but the risk lies in a cumulative mechanism whereby high debt, a persistent deficit and higher interest rates reinforce one another. A sustained rise in the cost of borrowing gradually reduces fiscal manoeuvre. As the additional interest payments do not fund investment, public services or tax cuts, these are unproductive funds. The real question, therefore, is how much it will cost in the future to finance France’s debt. For our leaders, the challenge will be to adopt a fiscal policy that, at the very least, stabilises the debt trajectory before this cost reduces fiscal manoeuvre too drastically.

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