France is facing rising borrowing costs, which has led to global concerns about the possibility of a public debt crisis in the second-largest economy in Europe.
Tensions in Financial Markets and Deteriorating Conditions
The existing tensions in financial markets are gradually spreading to other countries, increasing concerns about potential political issues in France and their impact on the region. France has not managed to maintain a balanced budget for over 30 years and has failed to keep its budget deficit within the limits of European Union agreements since 2019. This situation has arisen due to a significant increase in pension system costs and challenges such as rearmament and the green transition.
Read more: Results of the Jones Act exemption reduce concerns about China
Concerns Over Rising Interest Rates and Debt Crisis
Due to these problems, France's debt burden has reached a level where some are worried that the country may not be able to meet all its debt obligations. Currently, the yield on 10-year French bonds has approached 5 percent, the highest level since 2008. These concerns have become so serious that Emmanuel Moulin, the head of the Bank of France, has warned that "everything must be done" to prevent a debt crisis before the 2027 presidential elections.
In recent weeks, France has been recognized as an exception in Europe, but the yield spreads on government bonds for other countries like Italy, Belgium, and Greece are also widening. This situation indicates that markets have generally become more negative about the economic situation in Europe.
Sumitomo Mitsui DS Asset Management, one of Japan's largest asset managers, has announced that it has sold all of France's debt. In the event of a rapid issuance of bonds or forced sales, the risk of this problem spreading to other Eurozone countries increases.
Ultimately, given the current conditions, the European Central Bank may need to intervene, but such intervention will only be possible under specific circumstances. For the bank to act, it must confirm that countries are pursuing sound and sustainable fiscal and economic policies. For France, this means the need for significant actions that seem almost impossible before the 2027 elections.
Read more: Tens of thousands protest in Spain against the housing crisis · U.S. bombers leave RAF Fairford base in England
