France plans record borrowing to cover widening fiscal gap in 2027
The French Treasury announced that state borrowing will reach an unprecedented level in 2027 to finance a persistent budget deficit.
On Tuesday, the French Treasury disclosed that financing requirements for 2027 will hit a record high, marking a sharp rise from the previous year. The budget gap is projected to stay near five percent of national output, far exceeding the three-percent limit stipulated by the Maastricht Treaty. As bonds issued during the pandemic era mature, the state must refinance them at current rates that are considerably higher than the near-zero levels of 2020-21.
Consequently, the cost of servicing the debt is expected to jump from roughly 59 billion euros last year to over 70 billion euros in 2027. The Treasury highlighted that the average yield on medium- and long-term French government bonds has risen to about three and a half percent, up from just over three percent the year before.
Why it matters
Higher borrowing and rising debt service costs could pressure France's fiscal stability and affect European economic outlook.
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