Overview
- Citing a blog post published Thursday, Paul Krugman said France is on an "unsustainable fiscal trajectory" and may have shifted from being "too big to fail" to "too big to save".
- French 10‑year OAT yields have climbed from about 3.6% to roughly 4.9–5% in recent months and spreads versus German Bunds have widened, increasing the cost of rolling over French debt.
- Krugman identifies France’s generous pension system and stalled plans to raise the retirement age as major drivers of persistent deficits and higher long‑term borrowing needs.
- He warned that a rescue like past ECB interventions would be politically costly and financially large, and that creditor countries such as Germany would likely resist footing the bill.
- If borrowing costs stay elevated, households and public services could face higher taxes or spending cuts, markets could test other eurozone sovereigns, and the 2027 election could determine whether Paris pursues reforms or deeper fiscal strain.