France Overtakes Greece on Debt Costs

Sixteen years after Greece’s near-collapse almost pulled the euro apart, Athens is running a budget surplus. France, the eurozone’s second-largest economy, has announced spending cuts smaller than the annual rise in its own interest bill. Greek 10-year bonds yield about 3.40%; French ones sit at 3.68% (Bank of Greece, Trading Economics). The fiscal order that shaped the eurozone for a generation has turned upside down.

The snowball that eats the cuts

France’s deficit reached €152.5 billion in 2025, or 5.1% of GDP (INSEE, Le Monde). The government announced €6 billion in spending cuts. But the interest bill rose €9 billion in a single year, to €74 billion in 2026 (Kero.media). The savings do not even pay for the extra interest.

France is borrowing to pay interest on money it has already borrowed. By 2026, interest takes up nearly half the entire deficit (INSEE). The bill now exceeds the defence budget and amounts to about €949 per citizen per year going to bondholders (Le Français Moyen).

The IMF says France needs about €20-25 billion a year in structural adjustment through 2029, meaning permanent spending cuts or tax increases rather than once-off savings (IMF). The €6 billion package covers roughly a quarter of that. France’s independent fiscal council called the framework "coherent", but said it lacked detail on where the real savings would come from (Affiches-Moniteur).

Future growth, sacrificed

The cuts fall on investment. Research funding, which had been promised a €400 million increase, instead took a €324 million cut (Le Monde). France 2030, the industrial strategy fund, lost €400 million. Green transition programmes were cut by €275 million. Apprenticeship funding lost another €400 million (Capital).

Pensions and healthcare were left alone. France spends 34% of GDP on social protection, 4.5 points above the eurozone average (Banque de France). The IMF says tax increases are not much of an escape route, with revenue already above 51% of GDP (OECD). So research, training and green infrastructure take the hit, while current consumption and creditor payments remain protected.

Europe’s scrambled fiscal map

Greece left the EU’s macroeconomic imbalance surveillance on June 3 with a surplus of 1.7% of GDP (European Commission, via Lifo). France and Germany are both under Excessive Deficit Procedures, the EU’s formal process for countries breaching the 3%-of-GDP deficit ceiling. Ten member states now face the procedure, the largest group since the sovereign debt crisis. Italy expects to exit by autumn, with its deficit falling to 2.9% (ADNKronos).

Germany avoids sanctions through a new escape clause that excludes defence spending from deficit calculations, bringing its adjusted number to 2.9% (n-tv). France cannot use the same clause, because its deficit is too wide to be explained by defence alone (European Parliament). Bond markets have noticed. In September 2025, French 10-year yields briefly rose above Italian ones for the first time since the euro was created (Flossbach von Storch).

Drifting toward 2027

The April 2027 presidential election makes deep fiscal adjustment politically close to impossible. No leading candidate is proposing the scale of cuts the IMF says France needs (Connexion France). No EU country has ever been financially sanctioned under the Excessive Deficit Procedure (Council of the EU). The Dutch parliament voted 122-27 in May to reaffirm that the Netherlands "does not guarantee the national debts of other countries" (Tweede Kamer), narrowing the room for shared borrowing as a collective way out.

The Commission’s pessimistic scenario puts the French deficit at 5.7% in 2027 (Boursorama). If spreads, the gap between what France and Germany pay to borrow, widen sharply, the ECB could use its Transmission Protection Instrument, a backstop designed to stop bond panic spreading through the eurozone. But that requires the country in trouble to be following EU fiscal recommendations. The eurozone’s fiscal rules were written with countries like Greece in mind. Greece now follows them. France helped write them, and cannot.