The spread of the French ten-year bond against the Bund is around 80 basis points. Brussels thus reopens the debate on how the fiscal rule is applied to Paris.
According to moncloa.com, the spread of the French ten-year bond against the German Bund is around 80 basis points. At this level, France appears as the most scrutinised country in the eurozone just as Brussels reopens the discussion on the application of the fiscal rule.
French public debt exceeds 110% of GDP, according to the latest consolidated data from Eurostat. The deficit has been above 5% for years, and since July 2024, Paris has been under an excessive deficit procedure opened by the European Commission.
The reform of the Stability Pact approved in 2024 replaced uniform deficit targets with net spending trajectories negotiated with each country. France opted for the seven-year path, which requires presenting a reform framework each year that the Commission evaluates and the Council validates.
The autumn forecasts from the Commission, published in November, and the upcoming meeting of the Eurogroup will be the first occasions to assess whether Paris complies with the committed spending path.
In Spain, the analysis points to two effects. The Spanish ten-year bond has traded below the French one on several occasions, and several Spanish banking entities hold significant portfolios of French bonds, so a widening of the French spread would affect their capital ratios.
The negotiation of the next Multiannual Financial Framework, the EU budget for seven years whose serious discussion begins in 2027, also depends on the fiscal credibility of each state, including Spain.
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