France Debt Crisis Raises Risk of Social Unrest

France has formally acknowledged that its public debt is heading for a record level. In the draft 2027 budget texts sent to the High Council of Public Finances, the independent fiscal watchdog attached to the Court of Audit, during the night of September 18 to 19, 2026, the Ministry of Economy and Finance projects public debt at 119.3% of GDP in 2026 and 121.7% in 2027. These are record highs in the official statistical series and levels not seen since the aftermath of World War II. At the end of 2025, the ratio stood at 115.6% of GDP.

The ministry described the increase as mechanical, the direct consequence of a deficit that remains too high. After reaching 5.1% of GDP in 2025, the public deficit is expected to widen to 5.4% in 2026 before falling back to 5.0% in 2027, a goal Finance Minister Roland Lescure called ambitious but achievable. According to the ministry, the debt ratio can only stabilize once the deficit returns to 3% of GDP, a target still officially set for 2029.

What worries analysts is less the size of the debt than its speed. France is now the third most indebted country in the euro area, behind Greece and Italy, while other southern European countries are moving in the opposite direction. Spain's public debt dropped below 100% of GDP in July 2026, and Portugal's debt was already under 90% in 2025. In the first quarter of 2026, French debt reached 117.6% of GDP against a euro area average of about 89%. The Court of Audit has pointed out that France is the only heavily indebted euro area country whose ratio has not declined since the end of the pandemic.

The Court of Audit has also measured the cost of past delays. In its February 2026 report, it calculated that even a sustained deficit reduction effort of 0.6 percentage point of GDP per year from 2027, larger than anything achieved recently, would only bring the debt ratio back to its 2025 level in 2035. In other words, a decade of effort would be needed to erase the slippage of the last few years.

The interest bill is rising fast. Interest paid by the central government reached 51.6 billion euros in 2025, and the 2026 budget forecast 58 billion euros. Estimates based on the first half of 2026 now point to around 64 billion euros for the year, as maturing bonds issued at near-zero rates are refinanced at much higher yields. For all public administrations combined, the Court of Audit expects interest spending to exceed 100 billion euros by 2029, an amount comparable to the budget of a major ministry that brings no new service to citizens.

Bond markets have reacted sharply. On September 18, 2026, the yield on French 10-year government bonds rose above 4.5% for the first time since 2008 and has stayed above that level since, trading between 4.5% and 4.7% this week. The gap between French and German 10-year yields has widened beyond one percentage point for the first time since the euro area debt crisis of 2012. Investors now demand a higher return to lend to France than to Italy or Greece, and the 30-year yield stands above 5.2%, one of the highest levels in the G7. ING strategists expect the French-German spread to remain between 1 and 1.25 percentage points in the coming months, and analysts believe the European Central Bank would only step in if market moves became disorderly.

To contain the deficit, Prime Minister Sebastien Lecornu announced on September 17 a savings effort of 54 billion euros in the 2027 budget, without tax increases. He warned that without these measures the 2027 deficit would exceed 6.5% of GDP. The plan freezes cost-of-living adjustments for public sector pay and leaves the most sensitive decisions, such as the pace of pension increases, to parliament. The state and social security budget bills will be presented to the Council of Ministers on October 1, 2026, alongside the watchdog's opinion on the credibility of the government's forecasts.

The political path looks narrow. Since the July 2024 snap election, no group holds a majority in the National Assembly. Governments were toppled by no-confidence votes in December 2024 and September 2025, and the 2026 budget was only adopted in February 2026, after the government bypassed a final vote using a constitutional procedure and survived two no-confidence motions. With the presidential election scheduled for spring 2027, parties have little appetite for unpopular cuts, and Eurasia Group has warned that the 2027 draft could bring down the government. Short-term electoral considerations have repeatedly delayed structural reforms, which weakens the credibility of the new savings plan in the eyes of investors.

The budget squeeze comes as social tension is already rising. Energy prices have climbed since the conflict between the United States and Iran disrupted global markets, and the French economy contracted by 0.2% in the first quarter of 2026 before stagnating in the second. On September 15, unions across several sectors held a day of strikes. Energy workers protesting the planned review of their discounted electricity rate reduced power output, halted some gas transit and cut delivery capacity at the Dunkirk LNG terminal, France's largest, to 4 gigawatt hours per day. Fishermen blocked a fuel depot in Fos-sur-Mer, and police unions marched on the Champs-Elysees to demand better pay. On September 17, fishermen blocked access to several ports in southern France over fuel costs.

More disruption is scheduled. A strike notice covering EDF, Enedis and RTE, the operators of French power generation and the electricity grid, runs until December 31, 2026. A nationwide public sector strike backed by the CGT, FO, CFDT, UNSA, FSU, Solidaires and CFE-CGC unions is planned for September 29, and rail workers have also been called to walk out that day. In September 2025, similar budget protests brought hundreds of thousands of people onto the streets, with the CGT union claiming more than one million strikers and demonstrators.

The core risk for the coming months is that the state no longer has the financial room to buy social peace. In past crises, French governments defused unrest with costly measures such as energy price shields or targeted subsidies. Today, every new concession widens a deficit that markets are already punishing, while rising interest payments absorb resources that could have funded public services. The government has already asked ministers to extend targeted support for sectors hit by high fuel prices, which adds pressure to a budget built on spending cuts. Growing distrust of political leaders, fueled by repeated government collapses, makes compromise with unions and opposition parties harder to reach.

For supply chains, the consequences are concrete. Strikes in the energy, rail, port and fuel distribution sectors can delay freight, reduce LNG and electricity supply and disrupt deliveries across the country. Higher sovereign yields also raise borrowing costs for French companies and banks, whose financing is priced above the state's. Public procurement cuts and possible payment delays could affect suppliers to government agencies and local authorities. A further credit rating downgrade would add to these pressures.

If no budget is voted by the end of the year, the government would have to rely on a special law to keep collecting taxes, as it did in December 2024. Until then, the combination of record debt, rising borrowing costs and a restless population keeps the risk of social unrest and economic disruption in France at an elevated level.