France's 10-year borrowing costs have climbed to 4.7%, the highest level since the 2008 financial crisis, according to an analysis published by the Foundation for Economic Education. The report examines a stark warning delivered by Emmanuel Moulin, Governor of the Bank of France, who told the French Senate on September 25 that France must do "everything possible to avoid a sovereign debt crisis" before the 2027 presidential elections. Most critically, he cautioned that "it would be misguided to expect the European Central Bank to ride to the rescue."
The premium France pays over German bonds has exceeded one percentage point for the first time since 2012, and investors now require higher returns to lend to Paris than to Rome or Athens. At the Treasury's September auction, the 10-year cost settled at 4.23%, compared to 3.45% in February. Debt interest payments alone are expected to reach €65 billion (over $73 billion) before the end of 2026, now the largest single item of state spending. Public debt is projected at 119.3% of GDP this year, rising to 121.7% in 2027, while the economy contracted in the first quarter of 2026 and remained stagnant in the second quarter. Roughly half of France's debt is owned by nonresidents, compared to around 70% of Italy's sovereign debt held domestically.
Moulin used a specific phrase when discussing the issue—a "gradual stranglehold"—to describe how debt service is eclipsing all other expenditures. The report notes that Moulin's logic was straightforward: the European Central Bank, which sits in Frankfurt, has crisis mechanisms in place for national governments within the European Union that fail to resolve their debt crises, provided they have acted first. According to the analysis, the Transmission Protection Instrument at the ECB exists to help national governments avoid a debt crisis, but it has specific conditions, with eligibility depending on compliance with EU fiscal rules and approaching 150 basis points to trigger.
The report explains that France doesn't need to look far to see the consequences of breaching the limit. Italy learned the terms in August 2011 when its spread reached 390 basis points and Rome received a confidential letter from Jean-Claude Trichet and Mario Draghi setting out the reforms expected by the ECB. Eight days later, the government brought forward its balanced-budget target, and three days after that, the ECB began buying Italian debt. Within months, Silvio Berlusconi had given way to Mario Monti's emergency government. The analysis puts France's spread at between 100 and 125 basis points, and doubts the ECB will intervene while it remains focused on inflation.
Sébastien Lecornu's minority administration will present a 2027 budget seeking €54 billion ($61 billion) in savings, aiming for a deficit of 5% of GDP, or 4.8% excluding defense. The report notes that opposition parties are hardening their stances as the election approaches, and Jean-Luc Mélenchon, France's left-populist candidate and among the frontrunners to become president, has proposed canceling the 18% of French debt held by the Bank of France. Moulin rejected this idea, calling it "illegal, dangerous, and useless," with France not having defaulted since 1797 prior to the Revolution. The bottom line, according to the analysis: Moulin is effectively telling voters that nobody else is coming to rescue France economically, and the only variable voters control is fiscal discipline at home.