Yields, which reflect the level of risk investors demand to hold a country’s debt, are on the rise across most Western economies<\/a> but the UK<\/a> and France<\/a> are seeing the biggest leaps and the upwards trajectories are diverging from those of their peers.<\/p>\n The consequences are clear: rising costs of servicing bonds for governments only result in less cash to spend elsewhere and hinder efforts to balance the books.<\/p>\n While we know much about the market’s jitters over the state of the UK’s finances ahead of the autumn budget, we should cast a spotlight across the Channel now because the flashpoint could come as early as next week.<\/p>\n What’s the issue?<\/p>\n France is a country with a long-standing overspending problem – and no apparent political ability to rein it in.<\/p>\n While the cost of servicing its debts is not quite as bad as the yields the bond market is imposing on the UK, a renewed political crisis is seen as having more widespread ramifications.<\/p>\n It risks not only a return of social unrest<\/a> (remember the ‘gilets jaunes’ (yellow vests) protests of 2018<\/a> and subsequent violence over pension reforms and prices<\/a>?) but economic turmoil too.<\/p>\n Confidence vote looms<\/p>\n Image: The current French prime minister, who is planning to impose a \u20ac44bn (\u00a338.1bn) budget cut that includes a widespread spending freeze and the scrapping of two public holidays, looks to be heading for the exit.<\/p>\n Opposition groups in parliament are refusing to back Francois Bayrou in a confidence vote that he called for his minority government this coming Monday.<\/p>\n If he’s forced out, President Emmanuel Macron is likely to respond by trying to replace him, having refused to call new parliamentary elections ahead of his own second term concluding in 2027.<\/p>\n Polls suggest the public want snap elections and show a resurgence of anger over the impasse – a repeat of the row which forced out Michel Barnier as French PM late last year<\/a>.<\/p>\n The opposition parties agree that France’s total debt and budget deficit are too high but disagree on how they should be trimmed and who should foot the bill.<\/p>\n Image: The elephant(s) in the room<\/p>\n The numbers are pretty staggering.<\/p>\n French gross national debt stood at \u20ac3.35trn (\u00a32.9trn) at the end of the last financial year to March.<\/p>\n That represents almost 114% of its gross domestic product (GDP) on an annual basis. At the same time – to give the best comparison – the UK’s also stood at \u00a32.9trn, but that was 96.3% of GDP.<\/p>\n The French debt to GDP figure represents a record high for the nation and has been rising steadily for more than 20 years.<\/p>\n The budget deficit currently stands at 5.8% – that is almost double the 3% allowed by the European Union.<\/p>\n The Bayrou government’s plans aim to trim that figure to 4.6% in 2026.<\/p>\n That budget will be dead and buried, in all likelihood, if the government falls.<\/p>\n Read more: 6:30<\/p>\n Why did UK and Western governments’ debt just get more expensive?<\/p>\n What could happen next?<\/p>\n We saw an extraordinary intervention by the French finance minister Eric Lombard last week – remarks that were quickly corrected – which set the tone for the scale of the task ahead.<\/p>\n He raised the spectre of France potentially needing to seek help from the International Monetary Fund (IMF) if the government could not put its finances in order.<\/p>\n All the recent commentary has been more reassuring, but it failed to prevent the yield on the country’s 30-year bonds hit its highest level in more than 16 years on Tuesday.<\/p>\n There is a risk that bond markets lose faith completely if political compromise fails to materialise.<\/p>\n![\"Francois](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/09\/skynews-commissioner-francois-bayrou_6774940.jpg\")
<\/p>\n
\n Francois Bayrou assumed office in December last year after Michel Barnier was forced out. Pic: Reuters<\/p>\n![\"Gilets](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/09\/2371912040931327607_4856395.jpg\")
<\/p>\n
\n Gilets jaunes build a barricade in Paris during protests against high living costs in 2018. File pic: Imagebridge<\/p>\n
UK long-term borrowing costs at 27-year high<\/a>
No room for Treasury complacency in toxic market shift<\/a><\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/09\/skynews-ed-conway-economy-debt_7009536.jpg\")
<\/p>\n