There’s no there there to the French national debt story. Basic market signals confirm as much.
What has the market-friendly media in the U.S. worked up is the rise in yields on 10-year French government debt. They’re at highs last seen in 2002. Which is the point.
Markets, as previously alluded, don’t reflect all the expressed alarm about France’s debt. In 2002 France’s national debt was 913 billion euros. In 2026, the tab is up to $3.5 trillion. Please stop and think about those numbers for a bit.
France’s country debt has literally quadrupled since 2002, yet the yield on the nation’s debt is the same. Sorry, but that’s not a crisis nor is it a market panic. More realistically, it confuses crises.
What should have had the French and French-watchers up in arms in 2002, and now, is that markets for French debt are so sanguine about French debt. Said another way, the problem isn’t France’s debt, it’s France’s debt. Gertrude Stein (1874-1946), referenced above, might appreciate the antilogism.
Without knowing the level of hysteria within France’s punditry, the pundit class in the U.S. is terrified of government debt without being terrified of the debt. As in the rising amount of government debt horrifies them, but they routinely express indifference to the real crisis that France can borrow so much to begin with.
Which explains the second part of the attempt to channel Stein. The French must be taxed excessively for the government to borrow so substantially. That’s the crisis, though it’s unseen. Just how much more prosperous would France be if its Treasury couldn’t borrow so much, and couldn’t borrow so much because its people were taxed minimally?
Except that they’re taxed heavily, so much so that buyers of French debt trust France’s future tax revenue incomings quite substantially. There’s the horror. But for one problem: No one’s focused on what has enabled all the French debt since they’re sadly distracted by the nominal amount of debt itself. Which means they're glossing over the real problem.
Think a recent editorial from the Wall Street Journal chronicling France's myriad social and economic problems. Citing the riots in and around Paris related to school funding, the Journal editorial indicated that “France doesn’t have more money to spend on schools because it doesn’t have more money to spend on anything.” Except that it does have money to spend, and will have more money to spend.
Evidence supporting this unhappy claim can be found in yields on French government debt. The Journal acknowledges they’re merely at highs last seen in 2002. Yes, when the total debt was once again 1/4th of what it is now. Which is hardly a signal of a government running out of money.
Instead, the bet here is that “France” will find the money to spend. That's because investors with actual skin in the game are confident about future tax collections from the French.
Which is the crisis, albeit one that few want to address. Yet again obsessed with nominal levels of debt, American pundits and economists are blithe to the excessive taxation in France without which there would be no debt.
