IMI ranks France most exposed rich nation to debt crisis

France has become the biggest casualty of rising global bond yields, and a new comparison of 43 advanced economies ranks it as the one closest to a debt crisis. In a column published October 25, The Wall Street Journal News Corp ↘ 0.53% argued that France's problems look like those of most other countries, "only worse." As inflation and interest rates climbed, investors went looking for the borrowers least able to handle higher costs, and they settled on a heavily indebted government that had relied on very low rates.imidaily.com

Ranking puts France first

IMI ranked the 43 economies the IMF classes as advanced using four measures: credit ratings, bond spreads over Germany, IMF debt projections through 2031, and whether a country borrows in a currency its own central bank issues. France came out the most exposed, with Belgium and Italy next, followed by the United States and the United Kingdom. France's debt reached 119.0% of GDP at the end of June 2026, up from 115.7% at the end of 2025. The government's 2027 budget bill forecasts 121.7% by the end of next year.imidaily.com

Italy carries more debt relative to its economy, but investors now charge France more to borrow than either Italy or Greece. IMI also found that Japan, which has the highest debt ratio of the 43 at 199.4% of GDP, is further from a crisis than its debt suggests. That is because Japan borrows in yen and depends little on foreign lenders.imidaily.com

Yields at 24-year high

On Wednesday, October 21, France's 10-year bond yield briefly rose above 5% for the first time since 2002. The jump came as the country dealt with violent protests and a divided parliament fighting over the 2027 budget. By Thursday, the gap between French and German 10-year yields had passed 170 basis points, a level last seen in the euro zone debt crisis of the early 2010s. George Lagarias, chief economist at Forvis Mazars, said France was already in a debt crisis.cnbc.com+1

A reprieve from Moody's

On Friday, October 23, Moody's ↘ 1.55% left France's rating at Aa3 with a negative outlook. Bond markets had been expecting a downgrade. Moody's said the rating "assumes that a deficit-reducing budget for 2027 will be adopted." The agency added that a sustained fiscal effort will be needed after the April and May 2027 presidential elections to stabilize a debt load that will exceed 120% of GDP in 2027. S&P Global ↘ 0.62% and Fitch both rate France lower, at A+.lemonde.fr+2

France's deficit was 5.1% of GDP in 2025, and the government now expects 5.4% for 2026. Finance Minister Roland Lescure said on October 21 that the government is willing, if needed, to push the 2027 budget through without a parliamentary vote.imidaily.com