France’s borrowing costs have surged amid the worst social unrest in the country in decades.
asserted
costs → surge → decades
Yields on French bonds have risen to their highest levels in nearly a quarter of a century as investors demand higher returns for taking on government debt.
asserted
investors → rise → debt
The surge reflects a growing conviction in bond markets that lending to France is becoming an increasingly risky proposition.
asserted
lending → reflect → France
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asserted
Arabia → meet → attacks
While France is grappling with a widening gap between government spending and revenues, the country’s fragmented political landscape is bitterly divided on how to plug the hole.
asserted
landscape → grapple → hole
Meanwhile, hundreds of thousands of protesters, some of whom have participated in rioting and looting, have taken to the streets to oppose proposed budget cuts and demand greater spending on cost-of-living relief and public services such as education.
asserted
some → participate → education
France’s national debt is now at its highest level since the immediate aftermath of World War II, nearing 120 percent of gross domestic product (GDP).
asserted
debt → near → product
How do bonds work and why are France’s borrowing costs rising?
Bonds are a type of loan to a government or corporation.
asserted
Bonds → work → government
Countries routinely borrow from bond markets to allow spending that is not covered by tax revenues.
asserted
that → borrow → revenues
In exchange for buying a bond, an investor is paid regular interest payments, plus the original borrowed sum at a set date in the future.
asserted
investor → buy → future
These bonds can be traded on the bond market to other investors in the meantime.
asserted
bonds → trade → meantime
Bond prices are influenced by interest rates, inflation and confidence in the issuer’s ability to repay the loan, among other factors.
asserted
prices → influence → factors
When bond prices rise, bond yields fall, and vice versa.
asserted
yields → rise → ?
France’s 10-year bond yield has risen more than 130 basis points since June, topping 4.9 percent.
asserted
yield → rise → percent
France’s borrowing costs now stand at their highest levels since 2002, swallowing up a growing share of tax revenues that could otherwise be directed towards essential services such as education and healthcare.
uncertain
that → stand → education
While France’s debt levels are relatively high, the amount that a country owes is just one consideration for investors pricing the risk of its bonds.
asserted
country → owe → bonds
Market confidence in a country’s ability to meet its obligations is shaped by a range of factors, including the economy’s strength, the amount of its external debt versus domestic debt and the ability of the political system to govern effectively.
asserted
confidence → meet → system
“The sustainability of sovereign debt is rarely determined by its absolute level alone,” Victor Lequillerier, president of BSI Economics, a think tank in Paris, told Al Jazeera.
asserted
Lequillerier → determine → Jazeera
“It depends far more on its trajectory, structure, and broader economic and financial context.”
In France’s case, the paralysis of the country’s political system is a key driver of concern in the bond markets currently.
asserted
paralysis → depend → markets
In the fragmented National Assembly, French Prime Minister Ssbastien Lecornu, who was appointed by President Emmanuel Macron under the country’s semi-presidential system, is mired in a legislative battle to pass a budget for next year that includes 54 billion euros ($61bn) in savings.
asserted
that → appoint → savings
Marine Le Pen of far-right National Rally and Jean-Luc Melenchon of far-left France Unbowed, the two leading candidates in next year’s presidential election, are opposed to Lecornu’s proposals, though the government could invoke a constitutional clause to bypass parliament if deemed necessary.
uncertain
government → lead → parliament
Antonio Fatas, a professor of economics at INSEAD in Fontainebleau, France, told Al Jazeera: “Are the French numbers much worse than other countries?
asserted
numbers → tell → countries
No, but marginally they are worse, and the real difficulty here is that the political situation is such that the current government does not have an easy path to put together a budget that makes sense from a debt sustainability point of view.”
asserted
that → have → view
He added: “That’s what makes France a special case now, that’s why markets are very much worried about what France is going through and why you see a lot of the noise.”
asserted
you → add → noise
Of greater concern to markets than the total debt is France’s ballooning deficit, however, which is expected to reach 5.4 percent of GDP in 2026 – far above the European Union average of just more than 3 percent.
asserted
which → balloon → percent
This is the amount by which a government’s spending exceeds its income.
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spending → exceed → income
France, which has a strong tradition of left-wing politics and activism, has long had one of the biggest public sectors in the developed world.
asserted
which → have → world
Public pensions make up a particularly large proportion of expenditure, amounting to 14 percent of GDP, a figure that is likely to rise as the country’s working-age population shrinks in the coming decades.
asserted
population → make → decades
“Ironically, President Macron has long discussed the reforms needed to improve the fiscal outlook and avoid attracting the ire of bond investors,” Alex Dryden, a macroeconomist at the Centre for Sustainable Finance at SOAS University of London, told Al Jazeera.
asserted
Dryden → discuss → Jazeera
“From 2017 onwards, Macron has spoken of the need for pension reforms to ease the fiscal burden, but this is a lightning-rod political issue in France and attempts at reforms have stalled on multiple occasions.”
asserted
attempts → speak → occasions
“Tackling this issue would resolve much of France’s fiscal burden, but that is much easier said than done,” Dryden added.
asserted
Dryden → tackle → burden
While France levies some of the highest taxes of any country to support its sizeable welfare state, its budget deficit widened substantially during the pandemic and has remained above the recent historical trend ever since.
Exacerbating the shortfall has been a long-running trend of anaemic growth, which saw the French economy expand by just 59 percent of the OECD average from 2000 to 2025.
GDP is forecast to grow just 0.4 percent this year, following a 0.9 percent expansion in 2025.
BSI Economics’ Lequillerier said the French government has spent years shirking the kind of budgetary reforms that reduced the deficits of heavily indebted peers such as Italy, Spain and Portugal.
asserted
that → levy → Italy
“In the post-pandemic period, most European economies managed to normalise their fiscal positions and bring deficits closer to sustainable levels.
asserted
economies → manage → levels
France, however, failed to do so, with public spending growth persistently overwhelming revenue dynamics,” Lequillerier said.
asserted
Lequillerier → fail → dynamics
Lequillerier said investors’ tolerance for the government’s lack of fiscal restraint has finally run out.
asserted
tolerance → say → restraint
“The correction is becoming increasingly painful, and France risks isolating itself within the euro area as its principal fiscal underperformer,” he said.
asserted
he → become → underperformer
While relatively high, France’s debt is lower than that of several other economies, including the United States, Japan and Italy.
asserted
debt → include → States
But in each of those cases, there are specific circumstances that mitigate the risks.
asserted
that → be → risks
The US is better positioned than its peers to manage massive debt levels due to the status of the US dollar as the world’s primary reserve currency, which allows it to borrow money relatively cheaply and in greater amounts.
asserted
it → position → amounts
Japan has been able to sustain a debt-to-GDP ratio of more than 200 percent because most of its debt is held by domestic institutions, insulating it from capital flight.
asserted
most → sustain → flight
…and 17 more, not listed.
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