France’s Borrowing Costs Pass Greece

Sixteen years after Greece's debt crisis nearly broke the euro, Athens is running a budget surplus. France, the eurozone's second-largest economy, has just announced spending cuts smaller than the annual increase in its own interest bill. Greek 10-year bonds yield around 3.40%; French ones are at 3.68% (Bank of Greece, Trading Economics). The eurozone's old fiscal order has turned upside down.

The snowball that eats the cuts

France's deficit reached €152.5 billion in 2025, equal to 5.1% of GDP (INSEE, Le Monde). The government then announced €6 billion in spending cuts. But its interest bill rose by €9 billion in a single year, reaching €74 billion in 2026 (Kero.media). Paris is cutting less than its debt service is growing.

That is the mechanism now trapping France. The state borrows to pay interest on money already borrowed. By 2026, interest payments will absorb nearly half the entire deficit (INSEE). The bill is now larger than the defence budget and works out at about €949 per citizen per year transferred to bondholders (Le Français Moyen).

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

Future growth, sacrificed

The cuts fall on investment. Research funding that had been promised a €400 million increase instead received 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 remain protected. France spends 34% of GDP on social protection, 4.5 percentage points above the eurozone average (Banque de France). The IMF says tax increases are not a realistic answer, because revenue already exceeds 51% of GDP (OECD).

So the political choice is clear. Current consumption and payments to creditors are shielded. Research, training and green infrastructure take the hit. For a eurozone country such as Malta, where EU fiscal decisions quickly become domestic policy rather than distant Brussels paperwork, this matters because the pressure is shifting from the so-called periphery to the core.

Europe's scrambled fiscal map

Greece exited 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 that breach the deficit ceiling of 3% of GDP. 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. Its deficit is too large to be explained by defence alone (European Parliament).

Bond markets have already registered the change. In September 2025, French 10-year yields briefly rose above Italian ones for the first time since the euro was created (Flossbach von Storch). The old map, with disciplined northern and core countries on one side and weaker southern borrowers on the other, no longer describes the market.

Drifting toward 2027

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

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 deploy its Transmission Protection Instrument, a backstop designed to stop bond panic from spreading through the eurozone. But the instrument requires the country concerned to be following EU fiscal recommendations.

The eurozone's fiscal rules were written with countries like Greece in mind. Greece is now following them. France, one of the countries that shaped the rules, is not.