France's borrowing costs rise to highest since 2008
France's government borrowing costs have risen to levels not seen since the global financial crisis. The yield on benchmark 10-year bonds reached 4.10%—the highest since November 2008—adding pressure on the budget of a country with one of the largest debts in the eurozone.
The rise in rates comes amid a sell-off in government bonds in major economies and heightened inflation fears due to the war in the Middle East and expensive oil. This was reported by iROZHLAS.
On Tuesday, August 18, the yield on French 10-year bonds rose to 4.10%. The last time it was above this level was in November 2008, when during the global financial crisis it reached about 4.20%.
By August 21, the indicator had eased slightly but remained near its multi-year high. According to Agence France Trésor, the benchmark yield for 10-year French government securities TEC 10 stood at 4.08%.
Servicing France's debt becomes more expensive
For Paris, the rise in yields is particularly significant because of the size of the public debt and large annual financing needs. The higher the rate at which France issues new bonds and refinances maturing securities, the more the budget will have to spend on interest payments in the future.
In 2026, the state needs to raise about €305.7 billion to cover financing needs. The French Treasury plans to issue medium- and long-term bonds worth approximately €310 billion net of buybacks.
At the same time, this year France is due to redeem medium- and long-term bonds totalling around €175.8 billion, compared with €168 billion in 2025.
The rise in borrowing costs will therefore gradually affect budget spending as old, cheaper debt obligations are replaced by new paper with a higher interest rate.
Investors fear deficits and inflation
France is not alone in feeling the pressure. In August, government bond yields also rose markedly in Germany, the United Kingdom, the United States and Japan. Investors fear that the rise in energy prices will once again accelerate inflation and force central banks to keep interest rates high for longer.
An additional factor for France remains the state of public finances. The country's debt is about 117% of GDP, and the authorities must prepare the 2027 budget against the backdrop of a need to reduce the deficit while simultaneously financing growing spending.
The situation is complicated by the approach of the 2027 presidential election. Spending cuts or tax increases needed to stabilize public finances may prove politically difficult during an election campaign.
The market is also demanding a noticeably higher risk premium from France than from Germany. This means that the largest investors are scrutinizing Paris's ability to keep the budget deficit and public debt growth under control ever more closely.
