The French debt is currently causing serious concern. The surge in the ten-year rate, which recently approached 3.4%, illustrates the colossal challenges facing the government. On the one hand, the Minister of the Economy, Éric Lombard, must deal with a galloping interest burden. On the other hand, the risk premium, close to 90 basis points, serves as a reminder that the gap is gradually widening with Germany and is getting dangerously close to Italy.
Rates that are soaring
The rise in French rates should not be considered in isolation. Sovereign yields are rising everywhere, particularly under the effect of American inflation.
In the space of a few months, the ten-year rate in the United States rose from around 3.7% to more than 4.6%, with the symbolic bar of 5% in its sights.
This increase, fueled by a stricter monetary policy from the Federal Reserve, is pushing all rates upwards. In London too, the British debt is experiencing a dangerous escalation.
In turn, the euro zone is not immune to the movement. Since January 1, the European Central Bank has completely stopped buying sovereign bonds, thus putting an end to its policy ofquantitative easing (quantitative easing).
Direct consequence: private investors must now absorb the gigantic mass of public debt issues. France plans to raise nearly 300 billion euros in 2025, which adds to a global volume exceeding 1,000 billion for all European countries.
The sudden surge in the French rate, which has already jumped by 20 basis points since the start of the year, could weigh heavily on the budgetary balance. François Villeroy de Galhau, governor of the Bank of France, underlined this: the interest charge will soon threaten to equal, or even exceed, the national education budget.
This situation creates a real headache for Éric Lombard, already under pressure to contain the public deficit and reassure increasingly volatile financial markets.
A budgetary climate under close surveillance
In this climate of uncertainty, the government's room for maneuver is reduced. Promises of tax relief or massive investments risk colliding with the reality of a debt that is more costly to finance.
Speculation around a possible setback on pension reform does not help matters. Bond managers fear any compromise likely to further deepen public accounts and fuel market distrust.
Another point of vigilance: the risk premium. Already at 86 basis points, it continues to diverge from the German Bund, the benchmark for stability in the euro zone. Any additional slippage would bring France closer to the Italian profile, often considered more unstable. In the background, the fear of a downgrade of the sovereign rating looms, which could push yields even higher. Meanwhile, the market is about to enter an explosive phase.
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