Greece now borrows money cheaper than France: how “bankrupt Europe” swapped places with Paris

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Greecewhich just a decade and a half ago was considered Europe’s main debt risknow borrows money from the market cheaper than France: The yield on 10-year Greek bonds fell to around 4.28%, while the French yield approached 4.50%.

Back in March 2012, the situation looked almost the opposite. At that time, the yield on 10-year Greek securities was approaching 40%and the state was effectively cut off from normal market financing. France could borrow at about 3% during the same period.

Greece still owes more – but the market is looking at more than just the size of the debt

At first glance, the situation looks illogical. Greece’s public debt at the end of the first quarter was about 143.5% of GDPwhile French is approximately 117.6%.

However, investors evaluate not only the absolute size of debt, but also its dynamics. Over the previous 12 months, the Greek debt-to-GDP ratio fell by about 9.4 percentage pointswhile the French rose by about four points.

According to the forecast of the European Commission, Greece’s debt should continue to decline – from 146.1% of GDP in 2025 to approximately 134.4% in 2027. In France, a movement in the opposite direction is expected – above 120% of GDP.

The main difference is the budget

The gap is even more noticeable in the state of public finances. Greece ended last year with a budget surplus of approximately 1.7% of GDP and, according to forecasts, should remain in the black in the coming years.

France, on the contrary, received a deficit of about 5.1% of GDP. Moreover, on September 11, French Finance Minister Roland Lescure lowered the country’s economic growth forecast for 2026 from 0.7% to 0.5% and admitted that the previously stated 5% deficit target was no longer achievable.

It is this combination of weak growth, high deficits and rising borrowing that is causing the market to demand ever higher yields from Paris.

Why Greece’s huge debt is less dangerous today than it seems

The Greek debt structure is very different from the French one. A significant part of it appeared during the years of financial assistance programs and belongs not to private investors, but to European institutions.

These loans have very long repayment terms and predominantly fixed rates. The average maturity of Greek debt exceeds 18 years, and the average cost of servicing it, according to the Greek Public Debt Management Agency, is about 1.94%.

In other words, much of the Greek debt is like a very long fixed-rate mortgage: even if market interest rates rise, the value of the existing debt changes much more slowly.

France has much less such protection. Old bonds with low rates are gradually repaid, and Paris has to replace them with new ones – at the current, much higher interest rates.

€8 billion versus €310 billion

Another huge difference is the amount of new debt the market has to absorb.

Greece plans to issue bonds in 2026 of approximately €8 billion. At the same time, Athens is repaying about €13 billion of old obligations ahead of schedule and has a cash reserve of about €40 billion.

France is expected to place around €310 billion medium- and long-term bonds. The more securities the government constantly puts on the market, the higher the price that investors demand for their purchase.

But France did not become the “new Greece”

The current reversal does not mean that France is facing the Greek scenario of the 2010s. The French economy is more than ten times larger than Greece, its bond market is much deeper, and the country’s credit ratings are still noticeably higher.

The point is different: the market is now rewarding countries whose debt is reduced, the budget is under control and the volume of new borrowing is limited. And states with growing deficits and the need to constantly borrow more begin to pay an additional premium.

What does this mean for the average Greek resident?

Cheaper government debt alone does not mean supermarket prices or mortgage rates will fall tomorrow. But this is an important signal for the economy.

The cheaper a state borrows money, the less budget funds will be spent on servicing new debt in the future and the lower the country’s overall risk premium. This may gradually affect the cost of financing of Greek banks and companies.

However, a logical question arises for the population: if the financial situation of the state has improved so much that investors already consider Greece a cheaper borrower than France, When will this improvement become visible not only to the bond markets, but also to citizens – through incomes, taxes, home values ​​and everyday expenses?

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