By Thierry DIME
France does not have the eurozone’s heaviest debt load, nor the most imminent default risk, but it is now the country markets are charging the most for. For Swiss business leaders, the danger is not a neighbour’s collapse. It is the sustained rise in the cost of money across Europe.
On Friday 18 September, France crossed a threshold markets had not seen since 2012: to borrow for ten years, it now pays one percentage point more than Germany. Investors lending to the country are demanding a premium, much like a bank charging more to a customer deemed riskier. A few days earlier, Handelsblatt noted that Paris was even borrowing more expensively than Rome, a first since the birth of the euro.
The paradox is that France is not the most indebted country in the bloc. Its debt stands at 117.6% of annual economic output (GDP), compared with 138.9% for Italy and 143.5% for Greece, and only Spain fares better. In absolute terms, however, France carries the largest debt burden in the European Union. What lenders are penalising is therefore not the size of the debt, but the direction it is taking and the difficulty of correcting it. France spends far more each year than it earns: its deficit reached 5.1% of GDP in 2025, while the eurozone average was 2.9%. Two major rating agencies downgraded it in autumn 2025. Parliament is divided, making every savings measure hard to pass, and the 2027 presidential election is approaching. Greece, by contrast, posted a budget surplus last year. Lenders do not judge yesterday’s debt. They are betting on Paris’s ability to bring it under control tomorrow.
Against this backdrop, can France destabilise the monetary union? Probably not through a sudden accident, but through gradual erosion. The contagion scenario assumes a country that can no longer fund itself; France, however, is still funding itself, albeit at a higher cost, and the Eurogroup, meeting in Dublin on Friday, said it was concerned about the energy shock and rising rates, while seeing no fragmentation in the eurozone. The ECB’s backstop is designed for market panics, not to absorb a widening fiscal drift. The real mechanism is slower. Interest costs across public administrations reached €64.7 billion in 2025, or 2.2% of GDP, and Prime Minister Sébastien Lecornu admits he must find another €10 billion next year to fund them. On Thursday, he announced €54 billion in savings without tax hikes: if Parliament “endorses” the plan, he says, the target of a deficit at 5% of GDP would be reached by 2027, while acknowledging that this will not be the case in 2026. The budget is due to be presented to the Council of Ministers on 1 October, under threat of a no-confidence vote. Every setback adds a premium, every premium swells the debt. And the ECB is no longer providing the tailwind of the zero-rate years: it raised its deposit rate to 2.5% on 10 September, the highest level since March 2025, against a backdrop of inflation at 3.2% in August, a peak matching that of May. France will not bring down the euro. But it can make credit more expensive across the entire bloc for the long term, since its bonds serve as a benchmark for the continent’s second-largest economy.
What does this change for a Swiss company? First, the cost of capital for its French counterparties: subsidiaries, customers and suppliers fund themselves above the sovereign rate, and when that rate rises, the bill cascades down the chain, with longer payment terms, shrinking margins and higher non-payment risk. Second, demand: an effort of €54 billion, or around 2% of GDP, will weigh on consumption and public procurement, at a time when the government has already lowered its growth forecast. Third, the franc: the SNB is keeping its rate at 0% for now, even if a hike in December is becoming more likely, and says it is ready to intervene against a sharp appreciation, in the face of an ECB at 2.5%. Any episode of distrust toward Paris therefore fuels demand for safe-haven assets and hurts exporters.
Three markers are enough to navigate this: the fate of the budget in the National Assembly by year-end, the spread between the OAT and the Bund, and the 2027 presidential timetable. In practical terms, this means securing euro credit lines early in 2026, revisiting payment terms and trade credit insurance on French clients, staggering EUR/CHF hedging rather than betting on a single date, and mapping exposure to French debt both in treasury operations and in pension fund assets.
France’s risk premium is not an accident, it is a price. Those who factor it into their 2027 budgets will be ahead of those who wait until it becomes a crisis.
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