The hierarchy of European sovereign debts has just changed. This Tuesday, September 9, France borrows at a higher rate than Italy on bonds at ten years. Less than 24 hours after the fall of the Bayrou government, the markets decided: the French signature is no longer a refuge. This reversal, unprecedented for more than a decade, acts a loss of confidence which affects the budgetary credibility of the State.
In short
- France now borrows from a higher rate than Italy on bonds at ten years, an unprecedented changeover since the debt crisis.
- This reversal comes just after the fall of the Bayrou government, accentuating the political instability perceived by the markets.
- Investors sanction French inability to master its public finances, despite record domestic savings.
- Fitch must reassess the French sovereign note this Friday, September 12, with a high risk of downgrading in category A+.
France is now borrowing more expensive than Italy
This September 9, the curve of French sovereign rates officially exceeded that of Italy on the bond market at ten years, while the French debt will force the BCE to print. The yield of French Treasury OATs (assimilable bonds) reached 3.48 %, compared to 3.47 % for the Italian construction.
This tilting comes in the immediate next day of the fall of the Bayrou government, and marks the first time since the European debt crisis that France inspires less confidence than Italy in the eyes of the markets. Investors take note of current political paralysis and, above all, chronic inability to consolidate public accounts.
This reversal reflects an in -depth revision of the hierarchy of sovereign risks in the euro zone. Several elements contributed to this reversal:
- French political instability caused by the rejection of the vote of confidence, which dropped the Bayrou government on Monday September 8;
- The absence of a credible budget recovery plan, while the project to reduce the deficit of 44 billion euros for 2026 was abandoned de facto;
- A negative perception of French efforts in consolidation of public finances, despite high savings levels (430 billion euros);
- Conversely, Italy is perceived as more rigorous, although it displays a larger public debt (138 % of GDP against 114 % for France).
Like the underlines The economist Christian de Boissieu: “The markets are impressed by the adjustment of the Italian public deficit, and arrested by our difficulty in significantly reducing ours”.
His observation is supported by Philippe Crevel, for whom “It is our political instability that is sanctioned”. The image of France, long considered to be one of the stability pillars of the euro zone, is now marred by a credibility deficit.
Towards a degradation of the sovereign note?
Beyond the crossing of this threshold, the other major tension point concerns the notation of French debt. The Fitch Agency must rule this Friday, September 12, after closing the markets, on the maintenance or degradation of the current AA note – with negative perspective, allocated since October 2024.
This level is today the last bulwark before a downgrading in A+, a category which, if it was crossed, would force many institutional investors to mechanically disengage from French debt.
In his previous communications, Fitch had clearly warned :: “A degradation would be envisaged in the event of incapacity to implement a credible budgetary sanitation plan in the medium term, in particular due to political opposition or social pressures, but also much less favorable prospects for growth”.
However, with the fall of the Bayrou government, the rejection of its deficit reduction plan of 44 billion euros for 2026, and the absence of a clear budgetary cap on the horizon, the prospect of a downgrading has never been so serious.
A drop in rating would result in a mechanical increase in rates, already growing, and therefore an additional increase in the debt service, estimated at 62 billion euros for this year.
If the note drops, the upward spiral of the rates could accelerate, weakening the financial position of the State a little more and limiting its budgetary room for maneuver. This situation risks deteriorating France's perception on the markets, at the very moment when financing needs remain structurally high.
In this climate of political uncertainty and distrust of public debt, some institutional investors are starting to turn to non -sovereign assets, perceived as disconnected from state budgetary fragility. Bitcoin, in particular, regains attention as an alternative reserve of value. Its decentralized nature, its limited offer and its resistance to political manipulation strengthen its appeal to those who fear an inflationary spiral or a restructuring of debt.
The inversion of the rate curve between France and Italy marks a change in the perception of sovereign risk, which now combines budgetary doubt, political distrust and institutional uncertainty. While Rome collects the fruits of painful, but effective reform fruits, Paris pays the price of immobility and political disorder, which could lead to a guardianship of the IMF. If Fitch were to act a degradation in the coming days, the signal sent to the markets would be heavy with consequences.
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