France's borrowing costs have climbed above 5% for the first time in 24 years, with the yield on the country's benchmark 10-year government bond rising more than 8 basis points to 5% in morning trading before easing slightly to 4.99%. The spike reflects growing concern among financial markets about political dysfunction and the government's failure to pass its budget for next year, at a time when civic buildings across France still bear the scars of recent rioting.
Street protests that began in September with demands for school funding have evolved into broader demonstrations about living costs, and increasingly violent clashes with police have sparked riots across multiple towns and cities. Stores including Louis Vuitton have been looted, and protesters set fire to the town hall in Limoges. The unrest comes as no single party has controlled parliament since President Emmanuel Macron called a snap election in 2024, leaving the government unable to push through key policies including raising the pension age from 62 to 64.
France's fiscal position has become a significant concern for international lenders. The country's budget deficit stood at 5.1% of gross domestic product in 2025, while its debt pile reached 115.6% of GDP. Forecasts suggest both figures will worsen in the current financial year without intervention. Some international lenders, notably Japanese fund managers, have withdrawn from lending to France altogether, while those remaining have demanded higher interest rates, particularly for longer-term loans.
Matthew Ryan, head of market strategy at currency trading platform Ebury, said the political risks extending to France's 2027 budget appeared unlikely to fade soon. He noted that even if next year's budget clears parliament, it seems likely to contain so many compromises between left and right that the deficit problem will remain unaddressed. Ryan added that France's troubles are also dragging down the euro against other major currencies, as the political risk premium in the country continues to weigh on the common currency.
For French savers and borrowers, the higher yields mean the government will pay more to borrow money, potentially limiting spending on public services, while businesses seeking credit will face higher costs as lenders pass on the increased risk premium demanded by international investors.