France's Debt Soars to Record High as Presidential Election Looms

France's public debt has reached an all-time high under President Emmanuel Macron, sparking concerns among investors and emerging as a key issue in next year's presidential election. The country's national debt stands at 119% of its gross domestic product (GDP), with the government forecasting it will reach 122% by the end of the year.

The budget deficit is expected to continue, despite proposed spending cuts of €54 billion ($61 billion). This has left France's strained public finances likely to dominate the campaign. The country last balanced its budget in 1973, and for years, accumulated debt was high but manageable due to steady growth and low interest rates.

The COVID-19 pandemic and subsequent energy crisis have contributed significantly to the increase in public debt. With interest costs expected to surpass €90 billion in 2027, the government is facing a daunting challenge in bringing the debt under control. Radical-left presidential candidate Jean-Luc Melenchon has proposed canceling French government bonds held by the European Central Bank (ECB) to unlock money for public spending.

However, ECB President Christine Lagarde has dismissed this idea as a 'pure violation' of the EU treaty and warned that freezing debt would have far-reaching consequences. She emphasized that if France were to freeze its debt now, creditors could demand exorbitant terms or flat-out refuse to lend in the future.