French Debt Headed to 122% of GDP as Bond-Cancellation Idea Gains Traction

France expects its national debt to climb to nearly 122% of GDP, a new record, despite a proposed €54 billion ($61 billion) package of spending cuts that will still push the budget beyond EU spending limits next year. The government announced the figures on Thursday, framing a fiscal crisis that has become the defining issue ahead of next year's presidential election.

The debt of the eurozone's second-largest economy already stands at 119% of GDP, or €3.596 trillion ($4.08 trillion) as of the end of June, according to figures released this week by France's National Institute of Statistics and Economic Studies. That compares with 97.9% of GDP in 2019, before the COVID-19 pandemic.

France has not balanced its annual budget in more than 50 years — the last time was 1973. Budget minister David Amiel argued the new spending cuts were essential, ahead of what is certain to be a bruising battle to push them through parliament. "We cannot sweep the dust under the carpet," he said.

Public debt has climbed to record levels across the two terms of President Emmanuel Macron, unsettling investors and rising to the top of the political agenda as candidates vie to succeed him amid deep social tensions.

The Bond-Cancellation Debate

One proposal has drawn particular scrutiny. Radical-left presidential candidate Jean-Luc Mélenchon wants to cancel French government bonds held by the European Central Bank, arguing this would unlock money for public investment.

"Freezing this debt means transforming it into perpetual debt — that is, debt with no repayment deadline and a low or zero interest rate," Mélenchon said. "Freezing it is therefore effectively the same as canceling it."

ECB President Christine Lagarde dismissed the idea outright. She called it a "pure violation" of the EU treaty, which bans central bank financing of national governments, and warned of consequences for future borrowing: if France freezes its debt now, creditors could demand exorbitant terms the next time it seeks a loan — or refuse to lend at all.

"It's not because you repeat something that doesn't make any sense — either legally, technically, or financially — that it becomes something valid," Lagarde said during a Sept. 10 news conference.

On the right, far-right leader Marine Le Pen has called for reforms to "clean up" public finances, joining critics who call Mélenchon's plan unrealistic.

How France Got Here

France's debt was already high — above 90% of GDP every year from 2008 on — but manageable thanks to steady growth and years of near-zero interest rates. Then came the pandemic, followed by an energy crisis after Russia cut off most natural gas supplies following its 2022 invasion of Ukraine. The French government spent heavily on subsidies to keep businesses afloat and shield households from higher energy costs. Debt jumped from 98% of GDP in 2019 to 114% in 2020, just as global interest rates moved sharply higher.

France is hardly alone. Eurozone general government gross debt stood at 88.9% of GDP at the end of the first quarter of 2026, according to Eurostat. Greece's ratio is 143.5% and Italy's 138.9%; the U.S. figure of 122.6% actually exceeds France's. But France lacks the American advantage of issuing debt in the world's dominant reserve currency, which underpins Washington's borrowing capacity.

The Cost of Carrying the Debt

Debt service now consumes roughly 7% of the French state budget. With interest rates much higher than in the post-crisis era, interest costs are expected to surpass €90 billion in 2027 — more than the government plans to spend on defense (€63.4 billion) or schooling (€65.5 billion).

Credit rating agencies are split. Scope downgraded France's long-term ratings in September, citing "a sustained deterioration in the fiscal outlook, characterized by rising general government debt, persistently high fiscal deficits and limited progress on structural reforms." Fitch Ratings, however, maintained France's sovereign rating at "A+" with a stable outlook in August. "France's ratings are supported by its large, diversified high-income economy, a sound banking sector and a diverse investor base," Fitch said.

According to France's economy ministry, the debt is held by a broad base of investors: insurers, banks, central banks and pension funds in countries with funded pension systems.

With the budget battle in parliament looming and every presidential candidate now forced to spell out a debt strategy, France's borrowing costs — and its standing with creditors — will hinge on whether Paris can convert €54 billion in proposed cuts into law.