Eurozone fiscal pressures intensified on Thursday as bond yields surged, with France’s borrowing costs nearing 25-year highs amid warnings of a potential debt crisis. The 10-year French bond yield climbed to nearly 5%, up 80 basis points since early September, as investors demanded higher returns due to the country’s high deficit and political uncertainty ahead of 2027 presidential elections.
Eurozone finance ministers, meeting in Luxembourg on Thursday, urged France to accelerate approval of its 2027 budget to reduce market uncertainty. Valdis Dombrovskis, the European Commission’s executive vice president for economic affairs, emphasized the need for prudent fiscal policy, particularly for high-deficit countries, and noted that credible budget planning was essential to restore market confidence. He confirmed ongoing communication with French Finance Minister Roland Lescure on the issue .
The European Central Bank has so far refrained from activating support mechanisms, signaling that restoring investor confidence remains France’s responsibility. Meanwhile, Eurostat’s Business Cycle Clock indicated a sharp slowdown in the eurozone economy, with some nations potentially entering recession, though bond markets have yet to price in a full downturn .
