France is facing growing worries about its €3.5 trillion public debt as borrowing costs increase. Investors and economists fear that the debt could rise significantly, especially with political tensions ahead of next year’s presidential election making fiscal reform unlikely. If the government does not implement strict budget discipline, public debt could reach 203% of GDP by 2050, according to OECD Secretary-General Mathias Cormann.
As of the first quarter, France’s public debt stood at €3.5 trillion, equivalent to 117.5% of GDP, which is close to levels seen during the COVID-19 crisis. Unlike other euro zone countries, France has not yet reduced its debt since the pandemic. Although stronger economic growth or running primary budget surpluses could theoretically help, neither is expected in the short term due to a fragile government struggling to pass its 2026 budget.
Credit rating agency Moody’s anticipates that debt ratios will worsen for major European borrowers, with France expected to see the greatest increase in interest payments relative to public debt. Last year, interest payments reached €66 billion, becoming the state’s largest expense and likely to exceed education and defense budgets soon. The Cour des Comptes warns that by 2029, interest payments could rise to €100 billion as old debt is refinanced at higher rates.
To stabilize the debt, the government must reduce the budget deficit from about 5% of GDP to the EU’s 3% limit and eventually achieve a primary surplus. Failure to do so could lead to a situation where France needs to borrow increasingly to cover interest payments. This debt issue is becoming a key topic in the upcoming presidential election, with centrist candidates emphasizing fiscal discipline. Economic forecasts predict continued market volatility as the election approaches, with some advisors suggesting reduced exposure to French debt.
With information from Reuters
