France emerges as Europe’s new bond-market basket case, and Le Pen could make it worse — SkimNews
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- France's 10-year bond yields climbed above 4.8% this week, the highest since 2002, with the spread over German bonds widening to 1.4 percentage points — wider than Italy's 1.1-point spread, marking France as Europe's new bond-market basket case.
- France's debt sits at 120% of GDP, the third-highest in the euro zone after Greece and Italy, with budget deficits above 5% for three consecutive years and a 5.4% forecast for 2026; France hasn't balanced a budget since 1973 or met the EU's 3% deficit cap since 2019.
- Prime Minister Sébastien Lecornu proposed €54 billion in spending cuts and tax hikes for 2026, sparing only defense, though the package would merely hold the deficit at 5% and faces likely parliamentary resistance given his minority government.
- Marine Le Pen, leading 2027 presidential polls, has called for a 60%-of-GDP national debt limit that the article warns could trigger recession, alongside energy tax cuts and a lower retirement age for some workers — platforms the piece labels 'muddled and contradictory.'
- Jean-Luc Mélenchon proposed having the European Central Bank waive interest payments on a swath of French public debt, an approach the article dismisses as politically unrealistic.
- Giorgia Meloni's Italy offers a contrast — her populist government appointed a sober treasury minister, Giancarlo Giorgetti, cut the deficit, and saw Italian spreads over German bonds narrow from 2.5 points when she took office to 1.1 today.
- French corporate debt is yielding less than equivalent French government debt for 38% of high-grade issues this week, a symptom of the severity of the sovereign sell-off.
Why it matters: France's bond-market deterioration — with 10-year yields above 4.8% (highest since 2002) and debt at 120% of GDP — echoes the conditions that produced the 2011-12 Greek-driven euro-zone contagion, when borrowing costs spiked across the bloc. With Lecornu's minority government unable to pass meaningful deficit cuts and the 2027 presidential race bringing Le Pen's recession-risking debt-limit proposal into play, the euro zone's second-largest economy is heading into a budget fight with no clear fiscal exit.
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