France’s Appetite for ‘Magic Money’ Has Turned Into a Debt Bomb
French borrowing costs have surged as investors demand more compensation for rising debt, a 2027 budget fight and political uncertainty, analysts said.
- On Tuesday, French 10-year bond yields surged to 5.33%, their highest level since 2002, while the spread over German Bunds widened above 140 basis points amid investor panic.
- France's national debt is projected to hit a record 119% of GDP this year, intensifying scrutiny of borrowing sustainability amid planned record bond sales and eurozone inflation at 3.8%.
- Top economist Mohamed El-Erian warned Monday that "contagion risk is back," as Italian and Greek 10-year yields spiked to 4.74% and 4.57% respectively over the week.
- European Central Bank policymaker Joachim Nagel stated Thursday that the bank's debt-buying tools are designed for price stability, not targeting sovereign bond spreads, addressing intervention speculation.
- UBS CEO Sergio Ermotti warned Tuesday that resolving France's debt crisis requires "hard measures," while far-right presidential candidate Marine Le Pen called for sweeping spending cuts.
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Expert at Allianz GI, Matthieu de Clermont does not find "irrational" the current increase in the cost of debt and removes the threats of financial crisis in the near future.
France retains the "trust of the markets", although the increase in the cost of its public debt constitutes an "alarm signal", said Wednesday its Minister of Economy, Roland Lescure, when his government seeks to adopt a strong fiscal adjustment.
Radio France Internationale
coastaltvnews.comHigher borrowing costs an 'alarm signal' for France: finance minister
"We have the confidence of the markets in the sense that we have no trouble issuing debt," Roland Lescure told Franceinfo radio. "But it costs us more, and that is an alarm signal we all need to take on board." With investor worries mounting over France's debt and the ability of the government to pay it down, Paris has to offer higher interest rates on the government bonds it issues to reward investors for the perceived additional risk. France's…
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