France is not bankrupt. It is even worse: it is rich enough to postpone reckoning, large enough to defy European rules, and powerful enough to turn its own problem into a European problem. While Greece was overtaken by reality in 2010, France still possesses credit, state assets, tax power, and political influence. Because of this, it was able to keep doing what a smaller country would long ago no longer be allowed to do.
By Oscar Hammerstein
The European budgetary rules are simple. In principle, the annual government deficit may not exceed 3 per cent of gross domestic product and government debt may not exceed 60 per cent, unless it falls convincingly. France does not meet either standard.
In 2025, the deficit was 5.1 per cent, and the debt was 115.6 per cent of GDP. Since 2024, the country has once again faced the European excessive deficit procedure, after going through it between 2009 and 2018. In 2026, it was 119%, and in 2027, 121.7%. The latest official figures make the scale concrete.
At the end of June 2026, INSEE reported that French government debt amounted to 3,595.5 billion euros, or 119.0 per cent of GDP. In the second quarter alone, an additional 59.6 billion euros was added, following 75.8 billion in the first quarter: a total of 135.4 billion euros in extra debt in half a year. This reflects the established debt level at the end of the second quarter, not an estimate for all of 2026.
France has not violated the rules every year. It has done something politically more seductive: failing to substantially reduce the debt in good years and exploiting every exception in bad years to borrow further. Since the mid-1970s, virtually every budget has closed with a deficit. France pays its creditors but does not pay off its debt. Every maturing loan is replaced, while the debt as a whole continues to grow.
Moreover, that official account is not the complete one. Pension obligations do not appear as a debt on the balance sheet. Guarantees and risks associated with state-owned enterprises often only become apparent when they become reality.
France owns valuable companies, such as EDF, SNCF, La Poste, and interests in Airbus, Thales, and Renault, but if problems arise, it also serves as their financier of last resort. The renationalisation of EDF showed how quickly a strategic asset can become a public liability again.
Selling state assets offers no structural solution. Selling family jewels to pay the milkman makes a deficit less visible on a one-off basis, but does not cure it. The French problem isn’t a lack of assets, but a state that pledges more each year than it receives. Nowhere is this clearer than with pensions.
In 2025, France spent 422 billion euros, 14.1 per cent of its GDP, on old-age provisions. The system is pay-as-you-go: today’s employees and taxpayers pay today’s pensioners. Unlike the Netherlands, France has not built up pension assets of comparable size.
At the same time, the French are retiring early. The statutory minimum age is rising to 64, but the Netherlands is at 67, Germany is moving toward 67, and Denmark even anticipates 70 from 2040. France therefore spends more on pensions, lets citizens retire earlier, and has fewer reserves than countries with better budgetary control. That is why even the modest increase from 62 to 64 years caused strikes, blockades, social unrest, and a political crisis.
Virtually every French party now acknowledges that the debt is dangerous. But as soon as solutions are mentioned- working longer, lower spending, fewer civil servants, limiting entitlements, or phasing out subsidies- the majority disappears, and citizens storm the barricades.
Approximately 5.8 to 6 million people work directly in the French public sector: nearly one in five workers. Surrounding this is an even larger circle of employees at state-owned enterprises, subsidised institutions, care organisations, and private contractors. Add pensioners and benefit recipients, and more than half of the French population receives income directly or indirectly from public funds.
Consequently, every austerity measure immediately affects an organised group that knows exactly what it is losing, while the unorganised taxpayer barely notices what he might gain in the long run.
Immigration does not cause the debt, but France uses it sparingly to combat an ageing population. The country has approximately 7.3 million immigrants. In 2024, 62.4 per cent of immigrants aged 15 to 64 were employed, compared to 69.8 per cent of non-immigrants. France Stratégie estimated the difference in net budget contribution at minus 0.3 per cent of GDP: modest compared to the total deficit.
France has too many immigrants for its budget, but, like the Netherlands, too few immigrants are employed. Unemployed immigrants join every protest against the government.
Is France, then, the new Greece? Not literally. In 2010, Greece had not only high debt but also falsified statistics, corrupt politicians, a banking crisis, loss of market access, and a state that could barely collect taxes. It had to submit to the European Commission, the ECB, and the IMF. Today, Greece still has a higher debt-to-GDP ratio, but a budget surplus and long-maturity debt with relatively favourable terms.
Italy also has higher debt than France, at about 137 per cent of GDP. Yet the Italian annual deficit is much smaller, and fiscal policy under Giorgia Meloni has proven more predictable than many expected. Italy carries the heaviest legacy but has learned to live with it.
France has smaller debt but has not yet learned to stop. The patient with the worst X-ray is called Italy; the patient whose condition is deteriorating fastest is called France.
Therein lies the European danger. Greece could be saved because it was small. France is the second-largest economy in the European Union, a core euro country, a major shareholder in European institutions, and one of the largest issuers of government bonds.
A French crisis cannot be contained using the same instruments. It would spill over to banks, insurers, pension funds, other eurozone countries, and ultimately the credibility of the euro itself. The first loss, however, will not be wealth, but freedom. As interest payments rise, even less money remains for education, defence, justice, security, and infrastructure.
Subsequently, credit rating agencies lower their ratings, investors demand higher interest rates, and those interest rates widen the deficit once again. Ultimately, the financial markets dictate the program that Parliament did not dare adopt for fear of even more violent demonstrations.
That bill is now visibly mounting. The market yield on French ten-year bonds rose from about 4.25 per cent on September 7, 2026, to 4.87 per cent on October 5: more than 0.6 percentage points in four weeks. At the sovereign debt auction on October 1, France had to bid an average yield of 4.93 per cent for the bond maturing in November 2036.
Germany was around 3.46 per cent and the Netherlands around 3.57 per cent. France therefore paid about 1.30 percentage points more than Germany and 1.18 percentage points more than the Netherlands. These interest rate differences apply to ten-year bonds on the market, not immediately to the entire existing debt.
Higher financing costs affect France as soon as it takes on new debt or replaces maturing bonds. For example, 100 billion euros financed at an interest rate differential of 1.30 percentage points adds about 1.3 billion euros in annual interest.
Postponing reforms thus comes at a price with every refinancing. France is understandably trying to prevent that outcome by sharing risks at the European level. Paris regularly advocates for joint European debt for defence, energy, industry, and strategic autonomy. Furthermore, the European Savings and Investment Union must channel more private savings and pension capital towards European projects.
For the Netherlands, this is not a theoretical issue. We have accumulated approximately 1,500 to 1,700 billion euros in pension assets; France has promised its pensions primarily as future entitlements.
France cannot confiscate Dutch pension pots. Pension funds must invest in the interest of their participants. However, the political direction is clear: tax benefits, supervision, capital requirements, and European investment products can encourage funds to invest a larger share of their assets within Europe.
Additionally, joint EU debt makes Dutch taxpayers jointly responsible for repayment. The same Dutch citizen could then become involved twice: as a pension participant holding European bonds and as a taxpayer contributing to the repayment. Good European investments can yield excellent returns.
The danger begins when the pensioner’s interests become subordinate to industrial policy, solidarity, or rescuing countries that delay their own reforms. Then Dutch pension money is not stolen, but politically directed towards risks for which it was not built up.
The French press sees the fire but is divided on the cause. The right warns of a debt spiral; the left fears that debt panic is being used to dismantle the welfare state. Jean-Luc Mélenchon even proposed cancelling the portion of the national debt held at the Banque de France. The ECB and the Banque de France rightly call this legally impossible and financially dangerous.
The violent actions of ‘schoolchildren’ against austerity measures are largely carefully planned and organised by Mélenchon’s left-wing and antisemitic party, La France insoumise. The LFI relies electorally on voters with a Maghrebian background and Black voters. A French version of DENK with more electoral success.
The French communists, too, do not deny the debt; they deny that it must be repaid by spending less. Their recipe for a state living beyond its means is an even larger state, higher taxes, and a central bank that keeps the accounts out of sight. Electrorally, the PCF represents barely one in forty French people, but its conviction that any austerity is worse than any debt extends far beyond the party.
The most serious warning, therefore, comes not from the right but from Pierre Moscovici, former socialist minister and president of the Court of Accounts. According to him, France must ultimately achieve a primary surplus: receiving more than it spends before interest payments.
Otherwise, not democracy but the market will impose the correction. François Bayrou and Thierry Breton have also called the debt a threat to national sovereignty. Their diagnosis is more convincing than their ability to address it politically.
France is therefore not yet bankrupt. Nor does a modern state go bankrupt like a business; it raises taxes, reduces spending, causes inflation, restructures debt, or seeks support from others.
France already effectively wrote off two-thirds of its debt in 1797 during the ‘banqueroute des deux tiers’. Since the nineteenth century, it has honoured its market obligations, but its historical reputation is not financial collateral.
The greatest danger is not that France will stop paying tomorrow. It is that it can keep its debt manageable only by jeopardising its political freedom, its social peace, and ultimately the stability of the euro.
Greece was forced by its smallness to face the truth in time. France can evade that truth for longer. But now that it is revealing itself in the violent demonstrations, it will become apparent that Europe had a lifebuoy for Athens, but no ship large enough to carry Paris.
Marine Le Pen names the approaching financial abyss, but promises the French that only Brussels, immigrants, fraudsters, and bureaucrats will plunge into it. She wants to lower the retirement age, protect purchasing power, spare the tax authorities, and curb the debt at the same time. That is not a budget, but a credit-based election victory.
At the next elections, therefore, the French may choose between financial plague and financial cholera.
Sources:
– Europese Commissie, [Compliance tracker Europese begrotingsregels](https://commission.europa.eu/european-fiscal-board-efb/compliance-tracker_en).
– Europese Commissie, [Buitensporigtekortprocedure Frankrijk](https://economy-finance.ec.europa.eu/economic-governance-framework/stability-and-growth-pact/corrective-arm-excessive-deficit-procedure/excessive-deficit-procedures-overview/france_en).
– Conseil d’orientation des retraites, [Rapport annuel 2026](https://www.cor-retraites.fr/).
– Europese Commissie, [Het EU-budget in Frankrijk](https://france.representation.ec.europa.eu/strategie-et-priorites/le-budget-de-lue-en-france_fr).
– Europese Commissie, [Savings and Investments Union](https://finance.ec.europa.eu/regulation-and-supervision/savings-and-investments-union_en).
– De Nederlandsche Bank, [Het Nederlandse aandeel in de EU-schuld](https://www.dnb.nl/en/general-news/background-2025/what-is-the-dutch-share-of-eu-debt/).
– France Stratégie, [L’impact de l’immigration sur le marché du travail, les finances publiques et la croissance](https://www.strategie-plan.gouv.fr/publications/limpact-de-limmigration-marche-travail-finances-publiques-croissance).
– Frans ministerie van Binnenlandse Zaken, [Activiteit, werk en werkloosheid onder immigranten](https://www.immigration.interieur.gouv.fr/documentation/etudes-et-statistiques/activite-emploi-et-chomage-des-immigres-de-2014-a-2024.html).
– Federal Reserve Bank of Chicago, [French debt restructuring in 1721](https://www.chicagofed.org/publications/economic-perspectives/2016/5-velde).
– INSEE, [Franse overheidsschuld, tweede kwartaal 2026: 3.595,5 miljard euro en 119,0% van het bbp](https://www.insee.fr/fr/statistiques/9053525).
– Agence France Trésor, [Resultaten staatsleningveiling van 1 oktober 2026](https://www.aft.gouv.fr/fr/publications/communiques-presse/01-octobre-2026-emission-oat).
– Investing.com, [Historische tienjaarsrente Frankrijk, 7 september en 5 oktober 2026](https://www.investing.com/rates-bonds/france-10-year-bond-yield-historical-data).
– Trading Economics, [Tienjaarsrente Frankrijk, Duitsland en Nederland; indicatieve intradagkoersen, geraadpleegd op 6 oktober 2026](https://tradingeconomics.com/bonds).
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