France's Public Debt Rises to 119% of GDP, Exceeding Pandemic Peak
The French National Institute of Statistics and Economic Studies reported that by the end of the second quarter, public debt, according to Maastricht criteria, rose to €3.5955 trillion, equivalent to 119.0% of GDP, surpassing the pandemic peak of 117.8% in Q1 2021.
Debt increased by €59.6 billion in the quarter, following a €75.8 billion rise in the previous quarter. The ratio was 117.5% in Q1, with a total increase of approximately €135.4 billion over six months, raising the ratio by 3.3 percentage points. Central government and social security debt rose, while local government debt decreased. During the same period, cash in the public sector decreased by €6.8 billion, with net debt rising to 111.4% of GDP.
The Ministry of Finance previously predicted that the annual debt ratio would reach 119.3%, potentially rising to 121.7% by 2027, a level not seen since the agency began tracking in 1978. The full-year ratio for 2025 is expected to be 115.7%, down from below 100% in 2019. The deficit is projected to account for 5.4% of GDP this year, with a target of about 5.0% by 2027, significantly above the EU's 3% reference line. France ranks behind Greece and Italy in terms of debt ratio in the Eurozone.
The spread over German bonds briefly exceeded 1 percentage point, reaching a level rarely seen since the Eurozone debt crisis. The Prime Minister plans to allocate approximately €54 billion in savings in the 2027 budget while facing a divided parliament and the presidential election cycle. The Middle East conflict has driven up fuel costs, further constraining fiscal space. Debt interest has become an independent burden as interest rates are no longer negative.
To stabilize the ratio, a rough estimate suggests that the deficit needs to be reduced to about 2.4%, which is a significant deviation from the current path. In 1980, debt was only 20% of GDP, around 60% in 2000, and has increased almost every decade since.
In market mechanisms, the seller is the French government bonds that must be rolled over for refinancing, while the buyer is the Eurozone debt market funds that have lost patience with the fiscal path and demand higher premiums. This is an accumulation of events where the deficit continues to exceed nominal growth, not just a one-quarter anomaly. Funds are flowing from long-term French government bonds to German bonds and other sovereigns with narrower spreads. Beneficiaries are spread traders and German bonds, while French finances, bank holdings, and energy subsidies requiring state intervention are under pressure.
Source: Public Information
ABAB AI Insight
France's debt surpassing the pandemic peak indicates that "spending at all costs" has shifted from an emergency measure to a norm of structural deficit. During Macron's term, low interest rates locked in rigid spending and social security gaps on the balance sheet, and after rates turned positive, the same spending became subject to spread penalties. Lecornu aims to achieve €54 billion in savings before the elections, politically handing a mathematical problem of stabilizing the ratio to a parliament without a majority.
The capital path involves domestic savings and Eurozone banks continuing to buy OATs, while overseas accounts price political risks against the German spread. Money hasn't disappeared; it has merely shifted from the assumption that "France can always roll over debt cheaply" to a re-pricing of "it's difficult to bring the deficit below 3% before elections." The government issues bonds to cover social security and central gaps while allowing net debt to rise faster than gross debt due to declining cash.
Similar cases include Italy's long-term high debt and low growth, the sell-off of gilt-edged bonds after the UK's mini-budget, and Greece's external supervision after being monitored by rules. France is at the end of the fiscal expansion phase among core Eurozone countries and has not yet entered a stage of being taken over by procedures, but it has already lost its position of "core country bonds without premiums."
Structurally, regulatory changes are compounded by capital concentration: the EU's 60% and 3% benchmarks have regained pricing power, shifting from the narrative of the Ministry of Finance to debt market spreads. The mechanism is that nominal growth cannot keep up with the deficit, interest rates no longer subsidize delays, and the election calendar prohibits one-off tightening, so the ratio can only continue to rise.
ABAB News · Cognitive Laws
Once emergency deficits become structural, peaks are no longer tops.
After interest rates turn positive, delays themselves become a tax increase.
Spreads first account for political bookkeeping, with budgets later filling in the numbers.