France's rising borrowing costs are fueling concern among investors and economists that its public debt of 3.5 trillion euros ($4 trillion) could spiral higher just as political jockeying ahead of next year's presidential election makes fiscal reform unlikely.
They cite the risk of a "snowball effect," in which the average interest rate paid on government bonds exceeds economic growth, causing debt to rise relative to the size of the economy unless the government runs sustained primary budget surpluses.
"If nothing is done, the public debt could reach 203% of GDP by 2050. Strict budgetary discipline is therefore essential to stabilize public debt," Organisation for Economic Co-operation and Development (OECD) Secretary-General Mathias Cormann told journalists in Paris last week.
Public debt topped 3.5 trillion euros in the first quarter, reaching 117.5% of GDP, according to official data. That is close to levels seen during the COVID-19 crisis and leaves France as the only eurozone country yet to reduce its debt burden from post-pandemic highs, the Cour des Comptes public audit office said.
France could in theory reverse the dynamic through stronger growth or primary budget surpluses. But with a fragile government that struggled to pass a 2026 budget through the deeply divided parliament, neither appears likely in the near term.
