Bank of America's European economic research team points out that the spread between French 10-year government bonds and German bonds has widened to approximately 140 basis points, an increase of about 50 basis points since July, and is about 24 basis points higher than the spread for the same maturity in Italy. The French 10-year yield is around 4.9%, and fiscal risks are being significantly reassessed. However, France still has some buffers: the current account deficit is projected to be only 0.4% of GDP in 2025, and will approach that level in the first half of 2026; the average maturity of government debt exceeds 8 years, housing loans are mainly at fixed rates, and the proportion of businesses needing to renegotiate or roll over financing in the coming year is lower than its European counterparts. Therefore, the transmission of rising market interest rates to government interest payments and the debt burden of the private sector is relatively slow. Bank of America estimates that if current yields persist, France needs to achieve a primary fiscal surplus of 2% or more of GDP to stabilize its debt. Going forward, attention should be paid to whether fiscal consolidation can be implemented, the impact of the 2027 election on policy, and whether bank and sovereign risks reinforce each other.
Bank of America Securities - Global Economic Weekly Report: Fiscal Policies with Inconsistent Timing - 261009 - s…
