The price France pays to borrow money has climbed to a level not seen in about a quarter of a century, as new street protests threaten to deepen the country’s political and financial worries.
Yields on French government bonds, known as OATs, rise when investors demand more compensation for lending to the state. The recent jump suggests that markets are growing less confident that Paris can bring its finances under control. Higher yields also mean higher interest bills for the government, which already struggles with a large budget deficit and heavy debt.
The unrest adds to the uncertainty. Demonstrations across France show how hard it is for any government to push through unpopular measures, such as spending cuts or changes to pensions and public services. Each time a government tries to tighten the budget, it risks a backlash from voters and unions, and investors have noticed the pattern.
Politics is also complicating the picture. Polls show Marine Le Pen of the far right and Jean-Luc Mélenchon of the hard left among the most popular figures in the country. Their parties sit at opposite ends of the spectrum, but neither is known for supporting the kind of belt-tightening that bond investors usually want to see. That leaves mainstream leaders with little room to manoeuvre, since a strong opposition can block or water down any reform plan.
For ordinary people, the effects may feel distant but are real. When the government pays more to borrow, it has less money for schools, hospitals and infrastructure, or it must raise taxes or cut elsewhere. Higher government yields can also push up borrowing costs for banks, businesses and households.
Analysts say the key question is whether France can find a workable political compromise. Until then, the bond market is likely to stay jumpy, and every new protest may be read as another sign that reform will be slow and difficult.