Will France need European Central Bank bail-out?

详细摘要

“I am head of a state that is in a position of collapse. This cannot go on.” That was Francois Fillon, Prime Minister of France in September 2007. That year its national debt was…

“I am head of a state that is in a position of collapse. This cannot go on.”

That was Francois Fillon, Prime Minister of France in September 2007. That year its national debt was 1.212 trillion euros, 64.2 per cent of the country’s GDP.

But the situation did go on. The governments that followed Fillon’s tried but failed to bring down the debt. In October 2026, it reached a record 3.6 trillion euros, 119.3 per cent GDP.

The financial markets are sceptical governments will be able to cut the debt. In October, the 10-year government bond yield rose to almost five per cent in October from an average of 3.4 per cent in 2025 while the spread to Bunds (long-term debt) widened to about 140 basis points, a historical high.

Prime Minister Sebastien Lecornu is working through Parliament the 2027 budget. It aims to reduce the deficit to 5.0 per cent of GDP and comply with EU’s net expenditure rule. It contains 43 billion euros of new savings. including politically difficult measures, such as freezing public-sector wages, under-indexation of pensions above 1,260 euros a month, and extending the special tax on large companies.

“France has collapsed and is threatened with bankruptcy,” said L’Express magazine in an editorial this month. “Each government has promised to reduce the debt. In their defence, they invoke Covid, droughts, the wars in Ukraine and Iran and dissolutions of parliament, but no-one believes them.

“Especially not our European partners, those who have succeeded, through budgetary cuts and unpopular reforms, to clean up their public finances,” it said.

After the 2008/2009 financial crisis, the European Central Bank (ECB) provided billions of euros in credit to Greece, Italy, Portugal, Ireland, Spain and Cyprus to maintain the euro. These countries had to implement austerity programmes that were deeply unpopular.

France is trying to find a way to cut its enormous pension bill. Currently, it costs 482 billion euros a year, 14.1 per cent of GDP, about a quarter of total…

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