France Becomes a Flashpoint for the Eurozone as Bond Yields Soar Despite a Tough Move to Deploy Troops

French bond yields are surging again amid violent protests and unrest. While fiscal consolidation is urgent, pressure from protesters demanding support for households and a divided political establishment unable even to pass a fiscal consolidation budget are fueling the fiscal crisis.
The yield on French 10-year government bonds rose to as high as 4.96% intraday on the 20th (local time), widening the gap between French and German 10-year bond yields to 1.54 percentage points. Earlier this month, as fiscal concerns rapidly intensified, the yield climbed to 4.9937%, its highest level since July 2002, and the spread over German bonds widened to 1.59 percentage points—levels the current figures are approaching. These levels also exceed those seen in the early 2010s, when the Eurozone (the 20 countries that use the euro) debt crisis peaked.
■ Bond yields at their highest since 2002
With the April presidential election next year just six months away and parliament divided, markets are skeptical that the minority government can pass its budget. The resulting lack of confidence is shaking financial markets, affecting stocks, bonds and the currency at the same time. Next year’s budget includes €43 billion in new fiscal consolidation measures to reduce the deficit.
France’s national debt stands at 119% of gross domestic product (GDP), its highest level since 1946. The fiscal deficit is also projected to reach 5.4% of GDP. Even so, protesters have stepped up calls for more spending to support households and improve public services.
The Paris stock market fell for a second consecutive day. According to Investing.com, the CAC 40 closed down 0.38% on the 20th from the previous day. It had also fallen 1.1% the day before as concerns over protests and fiscal instability intensified. Moody’s, a credit rating agency, is due to announce its assessment of France’s sovereign credit rating on the 23rd, and another shock is expected. Moody’s currently assigns France an Aa3 rating with a “negative” outlook.
Jim Reid, an analyst at Deutsche Bank, said, “Against a difficult fiscal backdrop in France, the 2027 presidential election has added another political risk for markets.” Mike Bell of asset manager RBC BlueBay told CNBC, “France faces a real risk of falling into a sovereign debt crisis of its own,” adding, “It needs to put its public finances back on a sound footing.”
■ Troops to be deployed for protests on the 24th
Last weekend, a mass protest involving more than 550,000 people and calling for greater investment in the public sector escalated into violent arson and vandalism, prompting a curfew. Market jitters have intensified further, and the unrest is expected to fuel this trend even more.
In this situation, the Macron government is caught between protesters’ demands for support for households and improved public services and financial markets’ calls to reduce national debt and the fiscal deficit. It must respond to anger over the rising cost of living while investors are demanding spending cuts.
The violent protests show no sign of abating, and a renewed sense of imminent crisis is in the air, likely to further stoke fiscal concerns.
On the 20th, Prime Minister Sébastien Lecornu said on X (formerly Twitter), “The curfew last night helped calm the situation,” adding, “There will be new curfew measures tonight wherever they are needed.” Authorities are reportedly planning to maintain curfews for several more days in the capital, Paris, and the northern city of Lille, as well as in Bordeaux in the southwest and Nice in the south.
With arson and looting spreading across the country, authorities have also decided to deploy large numbers of police and security personnel, including military forces such as counterterrorism units, for the protests scheduled for the 24th. Prime Minister Lecornu has repeatedly claimed that the violence was organized and that far-left groups were behind it. Interior Minister Laurent Nuñez also said, “We will deploy Sentinelle forces”—the military’s counterterrorism vigilance operation—“so that the police and gendarmerie can focus on maintaining order.”
As violent protests deepened the turmoil, far-right National Rally (RN) candidate Marine Le Pen gained ground and led in several opinion polls. According to a Cluster17 poll published on the 19th, Le Pen was projected to lead the first round of next April’s election with at least 31% of the vote and advance to the runoff in first place.
[email protected] Lee Seok-woo, International Affairs Correspondent