France is becoming the ‘poster child’ of sovereign debt problems as government borrowing costs hit near 2008 highs

A tourist shelters from the sun under an embrella during a heatwave in Paris on July 10, 2026. Behrouz Mehri | Afp | Getty ImagesFrance's deteriorating public finances and political deadlock are becoming a growing concern for bond investors, with borrowing costs near financial-crisis-era highs as another difficult budget battle looms.The European Union's second-largest economy has endured recurring political instability and mounting fiscal strain in recent years. It has repeatedly broken European Commission rules on budget deficits and debt limits, and successive prime ministers have been ousted after failed attempts at reform, spending cuts and tax rises to bring the situation under control.France is subject to the EU's excessive deficit procedure, with the Council recommending that it end its excessive deficit by 2029 — but it has a long way to go. EU treaties set reference values of 3% of GDP for government deficits and 60% for government debt. Last year, France's deficit reached 5.1% of GDP, while the debt-to-GDP ratio surpassed 115%. The IMF projected in July that France's gross government debt would reach about 118.5% of GDP in 2026 and exceed 120% in 2027, remaining above th...