The unusual figure that appeared in France and the question: Is the fear of a debt crisis exaggerated?

The yield spread between French and German bonds surged to a 15-year high – nearly 170 basis points – amid protests, a deficit of 5.5%, and a debt-to-GDP ratio of 120%. Yaron Friedman from Bank Leumi assesses that the market is pricing in too high a risk, and that France will meet its debt obligations.

The yield spread between French and German government bonds surged to a 15-year high – nearly 170 basis points (1.7%) – amid massive protests, a political crisis, and a high budget deficit. Yaron Friedman, head of research at Bank Leumi's investment division, explains that France's deficit is expected to reach 5.5% in 2026, compared to the European Union target of 3%, and the debt-to-GDP ratio is nearly 120% – double that of Germany. Additionally, oil prices reached about $117 per barrel for Brent due to tensions in the Gulf and Russia-Ukraine, adding inflationary pressures in Europe. Friedman estimates that despite the political polarization between the radical left and far right, France will be able to meet its debt payments, and that the market may be pricing in too high a risk. He predicts that the upcoming spring elections will bring a new president who will try to calm the situation. This article is part of the 'Data of the Week' project in collaboration with Bank Leumi experts.

The unusual figure that appeared in France and the question: Is the fear of a debt crisis exaggerated?