{Economic Daily News, 13th Exclusive} France has recently been shrouded in multiple crises, with its massive debt hitting a record high, government bonds being sold off, political turmoil, and a worsening budget crisis, leaving the country trapped both domestically and internationally. As the second-largest economy in the European Union, France's debt crisis has a high likelihood of spreading across the entire eurozone, potentially causing severe impacts, raising market concerns about a repeat of the European debt crisis from years past.
France's fiscal deficit is projected to reach 5.4% of GDP this year. By the second quarter of 2026, France's public debt will reach 3.6 trillion euros, equivalent to 119% of GDP.
After the French government proposed its budget plan earlier this month, its government bonds were sold off, with the yield on 10-year French bonds briefly touching 5%, the highest level since 2002. The selling pressure on French bonds has spread to other European markets, pushing up bond yields in countries such as Italy, Spain, and Belgium, inevitably reminding markets of the European sovereign debt crisis around 2010.
The euro has also been dragged down, falling 0.4% against the US dollar to around 1.1156 dollars, declining for the fifth consecutive week and hitting its lowest level in about 17 months.
Paul Krugman, Nobel laureate in economics in 2008, recently warned that France is heading down a 'fiscally unsustainable path, a situation we saw during 2009 to 2012 (the eurozone debt crisis).'
He also stated that for the European Central Bank, rescuing France would be 'extremely costly,' and France might evolve from previously being 'too big to fail' into 'too big to save.' Once investor confidence collapses, it could trigger a sovereign debt crisis affecting the entire eurozone.
Jon Gray, President of Blackstone Group, also warned on Tuesday that 'the more severe challenges now lie in France, the UK, and Europe,' with risks more pressing than in the US, 'because economic growth rates are much lower, and the scale of deficits is very large.' (yc)
France's fiscal deficit is projected to reach 5.4% of GDP this year. By the second quarter of 2026, France's public debt will reach 3.6 trillion euros, equivalent to 119% of GDP.
After the French government proposed its budget plan earlier this month, its government bonds were sold off, with the yield on 10-year French bonds briefly touching 5%, the highest level since 2002. The selling pressure on French bonds has spread to other European markets, pushing up bond yields in countries such as Italy, Spain, and Belgium, inevitably reminding markets of the European sovereign debt crisis around 2010.
The euro has also been dragged down, falling 0.4% against the US dollar to around 1.1156 dollars, declining for the fifth consecutive week and hitting its lowest level in about 17 months.
Paul Krugman, Nobel laureate in economics in 2008, recently warned that France is heading down a 'fiscally unsustainable path, a situation we saw during 2009 to 2012 (the eurozone debt crisis).'
He also stated that for the European Central Bank, rescuing France would be 'extremely costly,' and France might evolve from previously being 'too big to fail' into 'too big to save.' Once investor confidence collapses, it could trigger a sovereign debt crisis affecting the entire eurozone.
Jon Gray, President of Blackstone Group, also warned on Tuesday that 'the more severe challenges now lie in France, the UK, and Europe,' with risks more pressing than in the US, 'because economic growth rates are much lower, and the scale of deficits is very large.' (yc)
