France to Borrow Record €340 Billion in 2027 as Covid-Era Debt Falls Due

France's debt management agency AFT said Tuesday it plans to borrow a record 340 billion euros, or roughly $385 billion, on the bond market in 2027 — some 28 billion euros more than this year. The funds will go toward financing government spending and repaying debt that is coming due. The announcement came two days before the government is due to present its 2027 budget.

AFT said it intends to raise the money through a mix of medium- and long-term bond issuance. The French government is forecasting a 4.3 percent interest rate on its 10-year bonds for 2027, though on Tuesday those bonds were already trading at 4.8 percent on the secondary market.

Highest yields since the financial crisis

In recent weeks, yields on French government debt have climbed to levels last seen during the global financial crisis. Investors have grown increasingly concerned both about the overall size of France's debt and about recent data showing the government has failed to reduce its deficit spending.

France's public deficit — the annual gap between government revenue and spending — stood at 5.1 percent of GDP last year. Rather than falling as originally planned, it is now forecast to rise to 5.4 percent of GDP this year. EU rules require member states to keep public deficits below three percent of GDP.

Higher interest rates mean the French government must pay investors more to borrow, leaving less money available for current spending. Prime Minister Sébastien Lecornu pledged earlier this month to cut the deficit next year without resorting to austerity, but with presidential elections just months away, the government will face significant pressure to reduce spending.