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France is facing renewed scrutiny over its public finances as government borrowing costs climb to their highest levels in more than two decades, raising concerns about the sustainability of the country's debt trajectory and the cost of servicing its debt.

The focus on France's finances intensified after yields on the country's benchmark 10-year government bonds rose above 5% in early October, their highest level since 2002, reflecting growing investor caution about fiscal risks and the broader global interest rate environment. According to France's debt management agency, the government has proposed a 2027 budget aimed at reducing the budget deficit to 5.0% of gross domestic product (GDP) while meeting a financing requirement of nearly €340 billion. The state’s debt servicing costs are expected to reach €72.9 billion in 2027.

The government is seeking to curb persistent budget deficits that have remained well above the European Union's threshold of 3% of GDP. France's Ministry of Finance expects public debt to reach a record 119.3% of GDP in 2026, rising further to 121.7% in 2027, up from 115.7% in 2025. The ministry also projects a budget deficit of 5.4% this year.

The French government has announced a package of spending cuts and revenue measures designed to stabilise public finances and reassure investors. The plan includes billions of euros in savings intended to slow the growth of debt and contain rising interest expenses.

The debate over France's public debt comes as several advanced economies grapple with higher borrowing costs following a prolonged period of elevated interest rates. Rising yields have increased governments' debt-servicing obligations, making fiscal discipline a greater priority for policymakers.

The European Commission forecast in May that France's debt would continue to increase, reaching around 120% of GDP by 2027 if policies remain unchanged. It also projected government deficits of more than 5% of GDP in both 2026 and 2027.

The situation has drawn comparisons with developments in some emerging markets, particularly Argentina, which has received credit-rating upgrades this year following fiscal reforms aimed at reducing deficits and inflation. However, economists note that France and Argentina face very different economic and institutional circumstances, making direct comparisons difficult.

Nigel Green, chief executive of financial advisory firm deVere Group, said investors are paying closer attention to the fiscal positions of governments regardless of their historical standing in global markets. He argued that countries with credible plans to improve public finances are being rewarded by investors, while those struggling to contain deficits are facing higher borrowing costs.

Market participants will now be watching France's upcoming credit-rating reviews and the progress of the 2027 budget through parliament for further indications of how the government intends to address its debt challenges.

Despite the pressure, France remains one of the world's largest economies and continues to benefit from deep capital markets and strong investor demand for its debt. However, analysts say the combination of high debt levels, persistent deficits and elevated interest rates means fiscal policy is likely to remain at the centre of economic debate in the months ahead.