French borrowing costs overtake US amid budget turmoil
Summary
French government borrowing costs have risen above those of the United States for the first time since 2013. This increase follows protests, political struggles to approve a new budget, and concerns about France’s high debt and inflation.Key Facts
- The interest rate (yield) on French 10-year bonds rose to 5.089%, the highest since July 2022.
- French borrowing costs surpassed U.S. Treasury bond costs, a first since 2013.
- Investors are worried because France’s government has not passed a new budget amid public protests.
- Tens of thousands protested for better education and teachers; some protests turned violent with arrests and damage to public buildings.
- France’s budget deficit is expected to be 5.1% of its economy in 2025, with debt at 115.6% of economic output.
- Rising French bond yields have caused increases in borrowing costs for other European countries like Italy and Spain.
- The European Central Bank recently raised interest rates but is expected to pause new hikes until December due to this financial pressure.
- Without a solution to France’s budget problem, bond markets are influencing interest rates more than the European Central Bank.
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