Key facts
- France's public debt exceeded €3.5 trillion in the first quarter, reaching 117.5% of GDP.
- Rising borrowing costs risk a "snowball effect" where debt grows faster than the economy.
- Interest payments on French public debt reached €66 billion last year and are projected to surpass education and defense budgets.
- The Cour des Comptes warned interest payments could approach €100 billion by 2029.
- Moody's anticipates deteriorating debt ratios for Europe's five largest economies, with France most affected.
- Fiscal discipline is deemed essential to stabilize public debt, with a risk of "suffocating under the weight of interest" if no action is taken.
France's public debt has surpassed €3.5 trillion, reaching 117.5% of GDP, with rising borrowing costs fueling investor and economist concerns about a potential "snowball effect." This dynamic, where interest payments exceed economic growth, could cause the debt to spiral higher, particularly as political maneuvering ahead of the 2027 presidential election makes fiscal reform unlikely.
OECD Secretary-General Mathias Cormann warned that without intervention, public debt could reach 203% of GDP by 2050, emphasizing the necessity of strict budgetary discipline. The Cour des Comptes, France's public audit office, noted that France is the only euro zone country yet to reduce its debt burden from post-pandemic highs. While stronger growth or primary budget surpluses could theoretically reverse this trend, a fragile government facing a divided parliament makes these scenarios improbable in the near term.
Credit rating firm Moody's anticipates deteriorating debt ratios among Europe's five largest borrowers, with France expected to experience the greatest increase in interest payments relative to its public debt. These interest payments reached €66 billion last year and are rapidly becoming the state's largest expense, potentially surpassing education and defense budgets. The Cour des Comptes has cautioned that this bill could approach €100 billion by 2029 as older, low-interest debt is refinanced at higher rates. The audit office has urged the government to outline a plan to reduce the budget deficit from around 5% of GDP to the EU's 3% ceiling and eventually achieve a primary surplus.
Without a primary surplus, France risks borrowing increasing amounts solely to cover interest payments, a situation described by a Cour des Comptes auditor as potentially "suffocating under the weight of interest." Even with sustained primary surpluses, reducing debt can be a lengthy process, as demonstrated by Italy's experience. The premium investors demand for holding French bonds over German bonds has returned to levels not seen since last October, surpassing the Italian-German spread, reflecting heightened market volatility ahead of the 2027 election.
The debt burden has become a significant political issue, with centrist contenders Edouard Philippe and Gabriel Attal making fiscal discipline a cornerstone of their campaigns. A lawmaker from the far-right National Rally has also raised alarms about the debt snowball effect. Finance Minister Roland Lescure has called for opposition parties to support the government's 2027 budget. The political landscape, marked by minority governments struggling to pass budgets since the 2024 snap election, continues to exert pressure on French bonds, with economists expecting elevated volatility.