French public debt increased further in the second quarter, reaching the unprecedented level of 3,595.5 billion euros at the end of June, announced the National Institute of Statistics and Economic Studies (Insee) on Tuesday September 29.
ADVERTISEMENT
ADVERTISEMENT
Measured against overall economic activity, France’s debt has also reached a historic high, at 119% of gross domestic product (GDP). We have to go back to 1946 to find such a high public debt rate. France then heals the wounds of the Second World War.
Between the end of the first quarter of 2026 and the end of the second, the debt increased by 59.6 billion euros, after having already increased by 75.8 billion in the first quarter, when it amounted to 117.5% of GDP.
More specifically, the debt of the central government and that of the social security system increased in the second quarter, while the debt of local authorities decreased.
At the beginning of the month, the government warned that public debt would reach 121.7% of GDP in 2027, more than double the European ceiling set at 60%, a level not seen since INSEE began establishing this statistic in 1978.
Rising cost of debt service
When interest rates were low, or even negative, as during the Covid-19 period in 2020 and 2021, getting into debt could seem like a good deal.
But since then, the swelling debt combined with the surge in rates has had very concrete consequences: each year, France must pay increasingly large sums to its creditors, of the order of 79 billion euros in 2026.
In recent weeks, conditions on the financial markets have deteriorated significantly. This is particularly true for France: investors now demand interest rates close to 5% to lend to the State over ten years. This has not been seen since 2008 and the global subprime financial crisis.
Direct consequence: a sharp increase in interest payments in the years to come. For 2027, the government expects the cost of servicing the debt to continue to increase, to 91 billion euros.
The 2027 budget puzzle
The growing debt service burden partly explains the current deterioration of public finances. This also considerably complicates the preparation of the finance bill for 2027, which must be presented on October 1. The text prepared by Sébastien Lecornu and his government aims to reduce the public deficit to 5% of GDP, one year later than initially planned.
However, there is a strong risk that this already modest objective will not be achieved, due to the presidential campaign. According to many economists, this electoral deadline freezes any possibility of structural reform.
Finally, if interest rates continue to rise and increase the cost of debt in the state budget, the finance bill which will soon be submitted to deputies will have only limited real scope.
Gn bussni
