Debt-ridden France branded ‘the new sick man of Europe’
Debt-ridden France branded ‘the new sick man of Europe’
Hans van LeeuwenWed, September 30, 2026 at 4:06 PM UTC
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President Emmanuel Macron and his prime minister Sebastien Lecornu are preparing a draft budget - Ludovic Marin/AFP via Getty Images
Investors have branded France “the new sick man of Europe”, selling off government bonds as the country’s debt crisis deepens.
The French government is preparing to present its draft budget on Thursday, but ministers have already signalled that the deficit will widen and borrowing will hit a fresh record next year.
Sebastien Lecornu, the prime minister, is hoping to cut €54bn (£46bn) of public spending. He faces stiff opposition, however, from politicians jockeying to replace Emmanuel Macron at a presidential election in April 2027.
Yields on French 10-year government bonds climbed again on Wednesday to 4.825pc. This pushed the spread between the French yield and the safer German equivalent above 1.2 percentage points – the highest since the 2012 eurozone crisis.
John Hardy, the head of macro strategy at Saxo Bank, said: “France is the new sick man of Europe”.
Mr Hardy said investors wanted politicians to make a concerted attempt to repair the nation’s finances but French voters were resisting reform.
He said: “We know from France’s political past that it’s very difficult to get past the population with any kind of serious notion that you’re going to raise the retirement age – or do anything else. Out come the pitchforks.”
He said investors’ only source of reassurance was the backstop of the European Central Bank (ECB), which views France as “too big to fail”.
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“France is hiding behind the EU. If this was an independent, free-standing country without this ECB setup, long ago things would have become much more dire.”
Evelyne Gomez-Liechti, a strategist at Mizuho Bank, said there was “a high bar” for the ECB to step in, and investors were looking for other sources of reassurance.
She said: “Investors are just not willing to step in and buy unless there is any sort of catalyst that could bring some stability. But the problem is, what could that catalyst be?”
Investors are also worried that the presidential election may boil down to a contest between National Rally’s Marine Le Pen, who has been reluctant to back spending cuts, and Left-wing populist Jean-Luc Melenchon, who has suggested cancelling chunks of public debt.
Charlotte de Montpellier, an analyst at ING, said: “No candidate at this stage has set out a concrete, documented plan for public finances going forward.”
The French budget deficit is expected to hit 5.4pc of gross domestic product next year, up from 5.1pc this year. Mr Lecornu was previously targeting 5pc.
France’s treasury said this week that it would issue a record €340bn of debt next year, 10pc more than this year. The cost of servicing debt would jump 13pc to €91bn.
The government also revealed this week that its debt-to-GDP ratio in the second quarter hit a record 119pc.
Ms de Montpellier said: “The arithmetic of public debt in France is very bad. It has been bad, but the news keeps getting worse.”
Source: “AOL Money”
