France's Borrowing Costs Cross 5% for First Time Since 2002

France

France's benchmark 10-year government bond yield crossed 5% on Wednesday, its highest level since 2002, as investors escalated pressure on the eurozone's second-largest economy over a deepening political and fiscal crisis. The yield touched 5.009% before easing slightly.

The gap between French and German 10-year bonds — the eurozone's key risk gauge — widened to about 159–164 basis points, its widest since the 2011–12 sovereign debt crisis. In a striking reversal, markets now demand a higher premium to lend to France than to Italy or Greece.

France's public debt stands above €3.5 trillion, roughly 119% of GDP, with the budget deficit projected near 5.4% of GDP. Prime Minister Sébastien Lecornu is pushing a budget with €43 billion in spending cuts through a divided parliament without a majority, while weekend riots deepened investor anxiety. France must sell a record €381 billion in bonds next year to fund the deficit and refinance old debt — now sharply more expensive.

The strain is spreading: Italian, Belgian and Spanish bond spreads widened too, and the euro is weakening. Pressure builds ahead of Moody's credit-rating review on Friday, with most economists expecting a downgrade.

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