France risks being "strangled by interest rates," warns the governor of the Bank of France

A central banker talking about strangulation is not an everyday occurrence. In an interview with the Financial Times published on Monday, October 5, Emmanuel Moulin, governor of the Bank of France, warns that the country risks being progressively "strangled by interest rates" if it does not rectify its public finances. The warning comes on the day the euro hits a 17-month low, weighed down by this same French debt.

Key points of this article:

• The governor of the Bank of France warned that France could be "strangled by interest rates" if it does not rectify its public finances.
• The 10-year borrowing rate for France nearly reached 5%, and the government is proposing a budgetary effort of 43 billion euros to reduce the deficit.

Interest rates: what the governor of the Bank of France says

The message comes in two parts, according to the interview given to the British daily. First, the alert. If nothing is done, the rise in rates will eventually strangle progressively the country's accounts. Then the safeguard, since France, insists Emmanuel Moulin, is not Greece during the eurozone crisis. He still considers the recent movements on sovereign debt to be "serious and concerning".

For the governor, the solution lies with Parliament. A budget voted in Paris, with a decreasing deficit, would be enough, according to him, to reassure the markets.

French debt: a 10-year rate nearing 5%

The figures lend weight to the warning. The rate at which France borrows for ten years has approached 5% on Friday, before falling to 4.86% on Monday. The gap with Germany, the premium that markets demand to lend to Paris rather than Berlin, briefly exceeded 1.5 points.

In contrast, the government proposes an effort of 43 billion euros, through savings and tax increases. The goal remains modest. It is to bring the deficit down to 5% of GDP, compared to 5.4% expected this year. However, the Parliament must still vote on this budget.

Debt burden: 91 billion euros in interest by 2027

The strangulation already has a price. The debt burden (the only interest paid to creditors) would reach 91 billion euros in 2027 according to the budget proposal, compared to just over 79 billion today.

Do the math. Interest is increasing by about 12 billion in one year, which is more than a quarter of the effort of 43 billion requested from the French. And since the deficit would remain at 5% of GDP, the debt would continue to grow. Bercy sees it rising from 119.3% to 121.7% of GDP.

Interest rates that are already driving creditors away

You may wonder who is behind "the markets"? Real lenders, and some have already started to leave. In Japan, where about 145 billion dollars of French debt is held, holdings have already decreased by 2.5% since the end of 2025. Each departure makes the next borrowing a little more expensive.

A country borrowing at 4.86% is not a bankrupt country, and Greece in 2012 borrowed at double-digit rates. The strangulation that Emmanuel Moulin talks about is slow, making it easy to ignore.

Bitcoin enthusiasts will see in this sequence free advertising for a currency without debt or budget to vote on. Bitcoin was trading around 86,000 dollars on Monday, with no particular reaction. The real meeting is parliamentary, as the effort of 43 billion euros still needs to be voted on.