France expects public debt to climb to a record 119.3% of gross domestic product this year and 121.7% in 2027, putting the country on a worsening fiscal path just as investors are demanding the highest premium on French government bonds since the eurozone debt crisis.
The Finance Ministry also expects the public-sector deficit to reach 5.4% of GDP in 2026 before declining to 5% next year.
That is still far above the European Union’s 3% deficit threshold and large enough for debt to continue rising even if the government delivers the planned improvement.
France’s debt ratio was 115.7% at the end of 2025 and below 100% as recently as 2019. The latest projections were submitted to the country’s High Council of Public Finances as part of the government’s preparation of its 2027 budget.
The deterioration is already visible in official data.
France’s Maastricht-definition public debt reached €3.54 trillion at the end of the first quarter, equal to 117.5% of GDP and up €75.6 billion in only three months. Second-quarter figures are scheduled for release later this month.
For markets, however, the more important change is the price France now has to pay to keep financing that debt.
Borrowing Costs Are Rising With the Debt
France’s benchmark 10-year government yield reached 4.47% Friday, according to Agence France Trésor.
Its yield premium over comparable German government bonds moved above one percentage point this week for the first time since 2012.
That spread is effectively the extra compensation investors demand to hold French sovereign debt rather than German Bunds, the euro area’s main benchmark.
It has widened as concerns over France’s fiscal trajectory have combined with a broader global bond selloff and higher inflation expectations.
The higher yields are beginning to flow into actual financing costs.
France plans to issue €310 billion of medium- and long-term government bonds this year, net of repurchases, up from €300 billion in 2025.
The average yield on bonds issued during 2025 was 3.14%. By the end of August, the weighted average rate on 2026 issuance had risen to about 3.5%.
At an auction Thursday, France sold bonds maturing between 2029 and 2032 at average yields ranging from 3.59% to 4.01%. Earlier this month, longer-term bonds maturing from 2036 to 2046 cleared between 4.19% and 4.74%.
Those rates do not immediately apply to France’s entire debt stock.
The average maturity of its marketable government debt is more than eight years, which slows the impact as older low-rate bonds are refinanced gradually.
It also means the pressure can persist for years if borrowing costs remain elevated.
France had €2.9 trillion of marketable central-government debt outstanding at the end of August. As securities mature and are replaced with more expensive bonds, interest expense rises even if the government stops accelerating its borrowing.
Interest Expense Is Becoming a Budget Problem of Its Own
The European Commission expects France’s general-government interest payments to rise to roughly 2.6% of GDP this year and 2.8% in 2027.
Its spring forecast already projected debt rising above 120% of GDP next year, driven largely by persistent primary deficits and increasing interest costs.
Since then, bond yields have risen further.
Debt-servicing costs for 2026 are now expected to exceed earlier assumptions by about €4.5 billion, while next year’s bill could come in roughly €10 billion above previous plans if current market conditions persist, according to Reuters reporting.
That creates an increasingly difficult feedback loop.
France needs to reduce spending or raise revenue to lower the deficit.
But a growing share of government resources is being absorbed by interest payments that cannot easily be cut.
If borrowing rates remain high, part of any fiscal savings must first cover the additional cost of servicing existing debt before they can meaningfully reduce the deficit.
Weak Growth Makes the Math Harder
The denominator in the debt-to-GDP ratio is also barely growing.
The French government recently lowered its 2026 economic-growth forecast to 0.5% and expects a recovery to 1% in 2027.
The Bank of France is slightly more cautious, forecasting only 0.4% growth this year after weak domestic consumption and investment.
Sluggish growth matters because stronger nominal GDP can make a large debt stock easier to carry.
When the economy grows slowly while the government continues running deficits above 5% of GDP, debt tends to rise faster than national income.
That is why reducing next year’s deficit from 5.4% to 5% would slow the deterioration without stopping it.
The government says the debt ratio is unlikely to stabilize until the deficit moves much closer to 3% of GDP.
France has maintained a goal of reaching that level by 2029.
The European Commission currently has France under its Excessive Deficit Procedure, the EU process for countries whose deficits or debt trajectories breach the bloc’s fiscal rules.
The €54 Billion Budget Test
The next major test is the 2027 budget.
Prime Minister Sébastien Lecornu’s government has outlined roughly €54 billion of fiscal measures intended to limit spending growth and bring the deficit down to 5%.
The precise package still has to move through the budget process and Parliament, so the final savings could differ from the current plan.
That uncertainty matters more than usual because bond investors are already charging France a noticeably larger risk premium.
Markets generally distinguish between a country carrying a large debt load and one where the political system appears unable to stop that debt from accelerating.
France has so far continued to attract strong demand at its bond auctions. Thursday’s medium-term issuance, for example, drew bids worth more than twice the amount ultimately sold across each maturity.
There is no sign that France is unable to finance itself.
The issue is price.
Strong auction demand can coexist with higher yields, and that is exactly what is happening: investors are still willing to lend France money, but increasingly at rates that make future budgets harder to balance.
The €310 billion issuance program gives the bond market repeated opportunities to reassess that risk throughout the year.
France’s next budget therefore needs to do more than show a smaller deficit on paper.
Investors will be watching whether the government can actually deliver enough fiscal tightening to alter the debt trajectory without weakening an economy already growing at roughly half a percent.
The immediate milestones are the High Council of Public Finances’ assessment of the government’s assumptions, the formal presentation of the 2027 budget on October 1 and the subsequent parliamentary negotiations.
If the deficit path holds while bond yields begin to ease, France can slow the rise in interest costs even while debt remains elevated.
If borrowing costs stay near current levels and the fiscal package is diluted, the 121.7% debt projection for 2027 may become another waypoint rather than the peak.