FiscalOutlook News & Analysis

France's 10-Year Borrowing Costs Hit Highest Since 2002 Amid Unrest

France's government borrowing costs reached their highest level since 2002, with the yield on 10-year French government bonds (OATs) rising 11 basis points. This increase amid ongoing social unrest is raising investor concern over France's fiscal outlook and its ability to meet budget deficit targets. Moody's maintained France's Aa3 credit rating but kept a negative outlook due to political fragmentation and legislative challenges. The French government aims to reduce the budget deficit to 5% of GDP by 2027 from a projected 5.4% in 2026. However, opposition in the National Assembly is resisting tax measures designed to generate savings. Government officials might use Article 49.3 or executive ordinances to push the budget through without a full vote to try and keep borrowing costs from rising further. The widening spread of French debt over German Bunds to the widest since 2011 reflects increased investor risk perceptions. Planned further demonstrations on October 24 and a national strike on November 5 add uncertainty about the government's ability to pass reforms and maintain fiscal discipline. For investors, the key risk is that prolonged political unrest may undermine growth and increase government borrowing costs, affecting France's fiscal health and eurozone debt stability.