French bond risk rises to one percentage point amid budget concerns

The spread between French 10-year government bonds and their German equivalents surged past 100 basis points on September 18, reaching 101 to 104 basis points. That’s the widest gap since the eurozone sovereign debt crisis of 2012, and it tells a simple story: investors are losing confidence in France’s ability to get its fiscal house in order. To put a basis point in plain terms, it’s one hundredth of a percentage point. So 100 basis points means France now pays a full percentage point more than Germany to borrow money for a decade. For one of Europe’s largest economies, that’s a meaningful penalty. The numbers behind the nervousness France’s budget deficit is projected to hit 5.4% of GDP in 2026. The EU’s official ceiling sits at 3%. French deficits have remained above 5% of GDP consistently since 2024. The country’s debt-to-GDP ratio now stands around 117.5% to 118%. Interest payments alone are projected to exceed €65 billion this year, making debt servicing one of the largest single items in the national budget. With French 10-year yields approaching 4.5%, levels not seen since 2008, the cost of rolling over existing debt keeps climbing. Earlier in 2026, the OAT-Bund spread hov...