France becomes a stress test for Europe. The markets are trembling with a new edition of the euro debt crisis – but is France really the new Greece?
The nervousness of the investors is increasing in the markets: Today, French Prime Minister François Bayrou wants to put the question of trust in the National Assembly in the dispute over his drastic savings plans.
Experts expect a fall of the government. According to Michel Barnier, the second prime minister would fail because of the non -reformability of our neighboring country. Threaten new protests in the style of the yellow vests.
Rising Bailiff As a warning signal
In the run -up to the interest rates for French government bonds rose rapidly. The return of the 30-year-old papers climbed over 4.5 percent in the previous week and thus reached a 16-year high. Ten -year government bonds rehearse with over 3.5 percent – and therefore not as high as since 2009.
Even if there is no question of the current level of panic, the attractive interest rates suggest that investors are growing. The risk premiums on French papers rise; For the French government, it is becoming increasingly expensive to get money on the financial markets.
Fear of the new edition of the Euro debt crisis
Some market observers and economists and economists therefore already feel reminded of the euro debt crisis from 2010. The big difference: at that time it was primarily a crisis of the southern euro countries, this time it is a core country in which the development goes in the completely wrong direction.
Fidel Martin, President of the French financial advisor Exoé, sees a significant warning in the increase in long -term French interest. “The higher the returns rise, the more severe the state’s debt loads,” he recalls.
And Eckhard Schulte, CEO of the asset manager Mainsky Asset Management, emphasizes: “In France, the debt situation explodes, the country now has the least sustainable debt trend of all countries we have observed – still to the USA and Italy.”
The euro debt crisis from 2010 was the most difficult test for the monetary union so far. The trigger was the rapidly growing public debt of several countries – above all Greece, but also Portugal, Ireland, Spain and Italy and later Cyprus. The returns of their government bonds sometimes increased dramatically, which made refinancing on the capital markets almost impossible. Only through massive interventions – including rescue packages and the announcement of the ECB “everything necessary” to maintain the euro – could the trust of the markets be restored.
The French debts are so high
In fact, the debt burden of the French state is enormous: in absolute numbers, it was 3.345 trillion in the first quarter of the current year – no other country in the euro zone has more debt than France.
The country is notoriously missing the Maastricht criteria, last year the state deficit was 5.8 percent of gross domestic product (GDP).
The debt ratio is also far beyond the euro budget rules: in 2024 the overall state debt was 113 percent of GDP. In the first quarter she climbed to 114.1 percent.
This means that the second largest economy in the euro zone is one of the countries with the highest debt ratio of the currency area. Only Italy (137.9 percent) and Greece (152.5 percent) offer even more.
Various debt rates in comparison
According to the International Monetary Fund (IMF), France’s debt rate should increase to more than 128 percent by the International Monetary Fund (IMF). However, France is already in spheres with the 116 percent forecast this year, in which the countries affected by the euro debt crisis were also affected.
For comparison: The Federal Republic had a debt rate of 62.5 percent in 2024. According to a forecast of the Bundesbank, the quota should increase to around 66 percent by 2027.
| country | Total debt in percent of GDP |
|---|---|
|
Greece |
165.3 |
|
Italy |
120.1 |
|
Ireland |
108.2 |
|
Portugal |
107.8 |
|
Spain |
68.5 |
|
Cyprus |
71.6 |
France before Rating?
The large rating agencies have all these developments on the screen – and they see France increasingly critically. Both Fitch and Standard & Poor’s confirmed their ratings in spring, but they provided them with a negative outlook – so there is a risk of downgrading.
At that time, Fitch mainly criticized the high proportion of the French state, which amounted to more than 57 percent of GDP. This is exactly where Premier Bayrou wanted to start the red pencil with his savings package and counteract hard, the household was to be shortened by 44 billion euros. But that should no longer happen.
“Whatever it Takes”
The next review of Fitch’s France rating will take place on Friday – just a few days after the Bayrou question of trust today. A downgrading would re-stir up the fears on the stock exchanges from a euro debt crisis 2.0.
Then the boss of the European Central Bank (ECB), Christine Lagarde, might also be challenged: after all, it was the brave announcement of her predecessor, which once brought the turn in the euro debt crisis 1.0 and calmed down the markets.
