European Central Bank President Christine Lagarde dismissed speculation about ECB intervention in France’s worsening budget crisis during a CNN Global Perspectives event in Bangkok. Lagarde emphasized that the solution to France’s financial struggles must come from domestic fiscal policies rather than external support.
France’s public debt has surged to nearly 120% of GDP, while the benchmark 10-year bond yields have climbed to nearly 5%, the highest level in over two decades. This spike in borrowing costs has slowed economic activity and intensified pressure on the government, which is also grappling with widespread student protests over staff shortages and deteriorating school infrastructure.
The country’s high social welfare spending leaves little room for fiscal maneuvering, especially as a presidential election looms next year. Investors fear that efforts to reduce the deficit may be complicated by political considerations. Lagarde noted, however, that rising bond yields are not unique to France, as major economies like the United States, Germany, and Japan have also seen increases due to rising government debt and the prolonged energy shock from the Iran war.