French borrowing costs hit 24-year high as civil unrest and budget fears spook markets
Initially calm protests have often been met with aggressive police tactics, sparking riots in many towns and cities in France. Photograph: Michel Euler/APView image in fullscreenInitially calm protests have often been met with aggressive police tactics, sparking riots in many towns and cities in France. Photograph: Michel Euler/APBondsFrench borrowing costs hit 24-year high as civil unrest and budget fears spook marketsYield on 10-year government bonds passes 5% amid failure to pass budget and fallout from violent street protests France’s borrowing costs have climbed above 5% for the first time in 24 years as political concerns and the government’s failure to agree a much-delayed budget spook the financial markets. With some civic buildings still smouldering from recent riots, a fresh bout of selling pushed up the yield – or interest rate – on bonds issued by the second largest economy in the eurozone. The yield on the benchmark 10-year bond – known as obligation assimilables du Trésor (Oat), issued by the French Treasury – rose more than 8 basis points to 5% in morning trading, before easing to 4.99%. The French government has yet to pass its budget for next year, while the country has been rocked by increasingly violent street protests in recent weeks. Protests that began in September with students calling for extra funds to deal with mould- and rat-infested schools, a lack of teachers and large class sizes evolved into wider demonstrations about the rising cost of living. Initially calm protests have often been met with aggressive police tactics, sparking riots in many towns and cities. Stores such as Louis Vuitton have been hit by looting, while protesters set fire to the town hall in Limoges. No single party has had overall control of parliament since the French president, Emmanuel Macron, called a snap election in 2024. The parliamentary gridlock has blocked his plans to increase the pension age from 62 to 64 and a series of measures designed to reduce or redirect state spending. France’s budget deficit was 5.1% of gross domestic product in 2025, while its debt pile stood at 115.6% of GDP. Forecasts for the deficit and debt show both increasing in the current financial year without remedial action. International lenders have become increasingly reticent about lending to Paris, accusing the government of becoming “fiscally incontinent”. Some have withdrawn from lending to France, notably Japanese fund managers, and those that remain have demanded a higher price for their loans, especially longer-period loans. Matthew Ryan, the head of market strategy at the currency trading and payments platform Ebury, said French woes were also dragging down the value of the euro against other major currencies. “The euro continues to lag most major currencies as the political risk premium in France looks unlikely to fade any time soon,” he said. “It remains unclear whether the 2027 budget will clear parliament, and even if it does, it seems set to be so riddled with concessions to both the left and the right that the deficit problem is left insufficiently addressed.”