France’s budget deficit was 5.1% of gross domestic product in 2025, while its debt pile stood at 115.6% of GDP. Parliamentary gridlock has blocked plans to increase the pension age from 62 to 64 years old and a series of measures designed to reduce or redirect state spending.
Protests began in September with students calling for extra funds to deal with mould and rat-infested schools, a lack of teachers, and large class sizes. These demonstrations later evolved into wider protests about the rising cost of living.
Initially calm protests were often met with aggressive police tactics, sparking riots in many towns and cities. Forecasts for the deficit and debt show both increasing in the current financial year without remedial action.
The financial market reaction follows weeks of violent street protests that rocked the country while the French government has yet to pass its budget for next year.
A fresh bout of selling pushed up the yield, or interest rate, on bonds issued by the second-largest economy in the eurozone as civic buildings still smouldered from recent riots.
The yield on the benchmark 10-year bond, known as obligation assimilables du Trésor or Oat and issued by the French Treasury, rose more than 8 basis points to 5% in morning trading before easing to 4.99%.
France’s borrowing costs have climbed above 5% for the first time in 24 years as political concerns and the government’s failure to agree a much-delayed budget spook the financial markets.
“The euro continues to lag most major currencies as the political risk premium in France looks unlikely to fade any time soon,” a market analyst said regarding the ongoing economic strain.