French public debt climbs to 119% of GDP as Lecornu prepares 54 billion euro budget adjustment

Debt expansion across state accounts

French national statistics institute Insee reported that public debt reached 3,595.5 billion euros (approximately 4.08 trillion US dollars) at the end of the second quarter of 2026, representing 119.0% of gross domestic product. The total represents the highest debt level relative to economic output since 1946. Debt increased by 59.6 billion euros between the end of March and the end of June 2026, following a 75.8 billion euro increase during the first quarter when liabilities stood at 117.5% of GDP. Central state borrowing accounted for the vast majority of the second-quarter expansion by adding 53 billion euros, while social security debt grew by 8.4 billion euros. In contrast, local public administrations reduced their debt obligations by 1.7 billion euros over the same three-month span.

Widening yield spread and borrowing costs

Mounting public liabilities have increased borrowing costs for the French treasury relative to European peers. On 28 September 2026, the yield on French 10-year sovereign bonds stood at 4.7%, compared with approximately 3.6% for German 10-year bonds, marking the largest yield gap between the two countries since 2012. Annual debt servicing costs are projected to reach 91 billion euros in 2027, according to Minister of the Economy and Finance Roland Lescure. France now ranks as the third most indebted country in the eurozone relative to GDP, behind Greece and Italy. Éric Dor, director of economic studies at the IESEG School of Management, noted that rising sovereign rates reflect both global borrowing demand from data center and artificial intelligence projects and shifting investor trust.

This is part of a global movement of rising rates.

Budgetary adjustment and political fragmentation

Prime Minister Sébastien Lecornu is scheduled to present the 2027 draft budget on Thursday, outlining 54 billion euros in fiscal adjustments. Lecornu took office one year ago following the resignation of François Bayrou, whose containment measures, including the elimination of public holidays, met broad opposition from trade unions and political parties. The government seeks to lower the annual budget deficit from an expected 5.4% of GDP in 2026 down to 5.0% in 2027, after missing its initial 5.0% deficit target for the current year. Lecornu must navigate a minority administration in parliament, where delicate measures such as proposed cuts to pensioner tax allowances face resistance ahead of the April and May 2027 presidential elections.

Fiscal trajectory under European rules

The Ministry of the Economy and Finance projects that French public debt will reach 119.3% of GDP by the end of 2026 and rise further to 121.7% in 2027. That projected ratio is more than double the European Union fiscal limit of 60% and represents a figure not seen since Insee began recording modern public debt series in 1978. France has been subject to formal European Union deficit surveillance procedures for two years due to persistent fiscal imbalances. When President Emmanuel Macron began his first term in 2017, public debt stood at 97% of GDP and the annual budget deficit was 2.8%. While the deficit climbed from 5.1% in 2025 to 5.4% in 2026, the government does not project bringing its deficit within the European 3% threshold until 2029.