French Debt Fears Intensify as Protests Challenge Spending Cuts

France is confronting growing financial-market pressure and renewed street protests as political divisions obstruct efforts to control public spending, raising concerns about the country's debt and the stability of the wider euro area. With President Emmanuel Macron approaching the end of his term next year, investors are increasingly questioning whether the government can reduce its deficit while responding to demands for public services and social protections.

France's debt reached 115.6% of gross domestic product in 2025, while its budget deficit stood at 5.1%, according to figures cited by The Guardian. The deficit is expected to rise to 5.4% this year, and Finance Minister Roland Lescure has pledged to reduce it without yet explaining how the government will achieve that goal.

French 10-year government bond yields climbed to their highest level since July 2002 last week, approaching 5%. Rising yields indicate that investors are demanding higher returns to lend to the government, increasing the potential cost of financing public debt. Japanese investors, traditionally important buyers of French debt, have also shifted toward domestic investments offering more attractive returns.

Business confidence is deteriorating amid the uncertainty. A survey by Medef, France's largest employers' federation, found that 82% of companies were pessimistic about the economic consequences of the next government's policies. Another 66% said their businesses could become vulnerable or face bankruptcy if political deadlock over economic policy continued for five years.

Antonio Fatas, an economics professor at Insead, warned that weak growth, mounting debt and political divisions were compounding the country's financial difficulties.

"I am very worried about the economic situation because growth is low and it is difficult to see how the dynamics change. Then you have the debt numbers, which are bad, and the financial markets are thinking the government is not in control. If I look at the political situation, I am panicking.

That's because too many political parties are saying let France burn. They want a crisis, believing it will improve their share of the vote."

France's difficulties reflect pressures also affecting the United Kingdom and the United States. Government spending increased sharply during the COVID-19 pandemic, followed by subsidies intended to cushion the economic effects of Russia's full-scale invasion of Ukraine in 2022. However, France has experienced particularly pronounced increases in borrowing costs.

Political uncertainty has also complicated pension reform. Macron's proposal to increase the retirement age from 62 to 64 stalled at 62 and nine months after parliament became deadlocked following the 2024 snap election. The stalled changes have limited projected savings from France's largely state-funded retirement system, while economic growth has remained sluggish.

Laurent Warlouzet, a history professor at the Sorbonne, said investors faced conflicting signals from Marine Le Pen, the National Rally leader and a frontrunner in next year's presidential election. Le Pen has advocated restoring the retirement age to 62 while proposing a referendum on a debt brake intended to restrict additional borrowing.

"The far right used to be a spendthrift populist force, especially under Le Pen's leadership, broadening the appeal of National Rally voters in the country's rust belts. In 2016–17, she still wanted France to leave the eurozone, which she regarded as a straitjacket."

Warlouzet also highlighted the challenge of reconciling tighter fiscal policy with demands for expanded public services.

"Nowadays, Le Pen has become an improbable fiscal hawk. How can she reconcile this with her voters' demands for more nurses, teachers, police officers and judges?"

Erik Britton, director of international advisory firm Fathom Consulting, said the prospect of a presidential runoff between Le Pen and Jean-Luc Mélenchon, leader of the left-wing La France Insoumise, had intensified investor concerns ahead of the expected election next April.

"What has changed is the likely runoff. In the second round, it now looks likely that Le Pen will contest the presidential election against Mélenchon from the far left. Le Pen's election might mean a 20% risk of Frexit: Mélenchon's election, though less likely on current polling, would have a much higher risk of Frexit."

Britton said the consequences could extend beyond France because of its central role in the euro area. A renewed confrontation over the currency union could revive disputes over shared responsibility for government debt and push borrowing costs higher across European bond markets, potentially excluding Germany.

France retains economic advantages, including relatively low electricity prices and comparatively strong infrastructure. Its schools also receive more funding than the Organisation for Economic Co-operation and Development average, despite recent student protests. However, the combination of weak growth, high debt, unsettled pension reform and uncertainty over next year's presidential election continues to complicate efforts to restore investor confidence.