DW. Deeply indebted, politically trapped in a standoff between extremes and led by a government without a parliamentary majority: These are the defining features of France’s current predicament.
If, in response to nationwide protests, the government plans to provide €4 billion ($4.48 billion) in low-interest loans to renovate schools by 2030 and allocate a further €1 billion to universities by 2029, it is promising money the state simply does not have.
France’s public debt stands at around 120% of gross domestic product (GDP). By comparison, Germany’s debt-to-GDP ratio is roughly 65%, despite its €600 billion investment package for infrastructure and defense.
Germany still enjoys the highest possible AAA credit rating. France, by contrast, is rated AA, A+ or Aa3, depending on the credit agency. While Germany’s outlook is consistently rated as stable, several agencies have assigned France a negative outlook.
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As a result, the French government must pay higher interest rates on its borrowing than Berlin. The risk premium over German government bonds, known as the spread, is now at its highest level since the financial crisis. France pays nearly 1.6 percentage points more in interest than Germany on 10-year bonds.
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