09.10.2026, 15:38
France's financial problems were seen as a threat to the EU
Source: OREANDA-NEWS
OREANDA-NEWS France's financial problems may undermine investor confidence in the European Union (EU). The threat to unification was seen in UnHerd.
According to analysts, France has gained a reputation as a country with a stable monetary and financial system, having experienced a profound economic transformation. However, Paris is currently experiencing a debt crisis, as are other members of the association. The ratio of public debt to GDP has doubled since 2008 and now stands at 120 percent, or 3.5 trillion euros.
"This is reminiscent of the eurozone crisis of 2011-2012: the spread between French 10-year bonds and German ones, that is, the additional interest rate that France pays for loans compared to its more reliable neighbor, has increased to 1.4 percent, indicating a higher risk that investors now take into account when lending to France. For comparison, the spread on Italian bonds is only 1.1 percent, while for Greece it is barely 1 percent," writes Unherd.
The problem for the rest of Europe is that the financial difficulties the country is facing can cause a domino effect. If investors do not believe in France's ability to control debt and government spending, they may begin to lose confidence in other EU countries with high debt levels and, as a result, in other developed economies such as the United Kingdom.
The sharp rise in the cost of borrowing is a clear signal to the French leaders that the state budget needs to be put in order. Additional concerns are raised by the proposal of French politician Jean-Luc Melenchon to refuse to pay 18 percent of the national debt.
In France, they have already wanted to reduce the budget deficit by increasing taxes. The French government has unveiled a 43 billion euro ($48.6 billion) plan of new measures to reduce the budget deficit to 5 percent of GDP in 2027 from 5.4 percent in 2026. "To close the gap between France and its main European partners, it is about the trust, confidence and ability of the French government to show that we can ensure the sustainable growth of our public finances," Finance Minister Roland Lescure said.
According to analysts, France has gained a reputation as a country with a stable monetary and financial system, having experienced a profound economic transformation. However, Paris is currently experiencing a debt crisis, as are other members of the association. The ratio of public debt to GDP has doubled since 2008 and now stands at 120 percent, or 3.5 trillion euros.
"This is reminiscent of the eurozone crisis of 2011-2012: the spread between French 10-year bonds and German ones, that is, the additional interest rate that France pays for loans compared to its more reliable neighbor, has increased to 1.4 percent, indicating a higher risk that investors now take into account when lending to France. For comparison, the spread on Italian bonds is only 1.1 percent, while for Greece it is barely 1 percent," writes Unherd.
The problem for the rest of Europe is that the financial difficulties the country is facing can cause a domino effect. If investors do not believe in France's ability to control debt and government spending, they may begin to lose confidence in other EU countries with high debt levels and, as a result, in other developed economies such as the United Kingdom.
The sharp rise in the cost of borrowing is a clear signal to the French leaders that the state budget needs to be put in order. Additional concerns are raised by the proposal of French politician Jean-Luc Melenchon to refuse to pay 18 percent of the national debt.
In France, they have already wanted to reduce the budget deficit by increasing taxes. The French government has unveiled a 43 billion euro ($48.6 billion) plan of new measures to reduce the budget deficit to 5 percent of GDP in 2027 from 5.4 percent in 2026. "To close the gap between France and its main European partners, it is about the trust, confidence and ability of the French government to show that we can ensure the sustainable growth of our public finances," Finance Minister Roland Lescure said.
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