French Finance Minister Roland Lescure said France must prove to bond markets that it is not what he called the sick man of Europe, in an interview with the Financial Times. He said the government must calm protesters and get the 2027 budget adopted without increasing spending.
Yields near a 25-year mark
The French 10-year government bond yield reached 5 percent last week, a level last seen about 25 years ago. The spread over German Bunds has roughly doubled over the past three months, reflecting investor concern about France’s ability to control its budget deficit and about next year’s presidential election, where Marine Le Pen leads opinion polls.
Moody’s did not downgrade France’s credit rating, against market expectations. The French budget deficit stood at 5.1 percent of GDP last year and is expected to reach 5.4 percent of GDP this year. The draft 2027 budget contains 43 billion euros in spending cuts and tax increases.
We have no money
“We have no money, so we have to be creative,” Lescure said. Prime Minister Sébastien Lecornu’s government has faced protests from students that have widened into broader discontent over living costs and government policy.
To ease pressure on households, the government bought an extra 300,000 tonnes a month of diesel from Middle East producers and released part of its strategic fuel reserves. It also announced 15,000 new university and vocational training places for students and 1 billion euros in additional funding for higher education over five years.
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Lescure pointed to the French household savings rate of 17.9 percent as a sign of resilience. He drew a comparison with 2019, when the government spent 17 billion euros on tax cuts and support measures in response to the yellow vest protests.
