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2026-09-21 19:08:10
[France's Fiscal Situation Enters a Vicious Cycle, Bond Market Reacts] ⑴ France is caught in a vicious fiscal cycle, and the bond market has begun to notice. ⑵ The spread between French and German 10-year bond yields has risen to its highest level in 14 years. ⑶ The logic of this cycle is: weak growth coupled with rising interest rates leads to a heavier debt burden, which in turn expands the deficit, ultimately making borrowing more expensive. ⑷ At the same time, politicians from both ends of the political spectrum are advocating for increased spending. ⑸ This situation is unsustainable; further attention should be paid to the progress of French fiscal consolidation and further changes in sovereign debt risk premiums.
