France to Borrow a Record €340 Billion in 2027 Amid Rising Debt and Interest Rates

France is set to borrow a historic sum of 340 billion euros in 2027, marking the highest amount the country has ever planned to raise from financial markets. This borrowing represents an increase of 28 billion euros compared to 2026 and is driven by the need to refinance maturing debts and finance growing national deficits. The country's public debt has reached unprecedented levels, standing at 3,595 billion euros or 119% of GDP as of the second quarter, with projections suggesting it will rise to 122% of GDP the following year.

The rising cost of borrowing presents a significant fiscal challenge. Interest rates on French government bonds have surged to nearly 5%, the highest in the Eurozone and a level not seen since 2008. By comparison, Germany's borrowing cost remains around 3.5%. This stark difference has worried investors, whose confidence appears shaken amid doubts about France's capacity to implement effective structural reforms to reduce its deficit. According to Pascal de Lima, chief economist at BKMC, investors are demanding higher yields because of these concerns.

Ahead of the budget presentation, the Agency France Trésor announced the increased borrowing plans, while Economy Minister Roland Lescure assured that state bonds continue to attract buyers despite the challenging environment. The upcoming state budget will serve as a critical test of France’s fiscal credibility, especially as announced savings of 54 billion euros remain vaguely detailed. Of this, only 10 billion euros in concrete measures have been outlined, including a freeze on civil servant salaries, which has already led to strikes. Additional potential measures include tax hikes on highway and airport operators, with pension savings yet to be defined and left for parliamentary decision.

Over the last five years, the state borrowing program has expanded by 80 billion euros, reflecting the deepening fiscal needs. The combination of soaring debt levels, higher interest costs, and investor skepticism underscore the pressing pressure France faces in managing its finances effectively going forward.