The euro has fallen almost 5% against the dollar since the start of the year, while the yield on French 10-year bonds has risen above 5% for the first time since 2002. The yield spread with German bonds has exceeded 170 basis points, reflecting heightened market concern, and the cost of insuring France against sovereign default is the highest since the eurozone debt crisis of the early 2010s. France combines one of the euro area’s highest deficit ratios, growth forecast to slow to 0.5% in 2026, and debt reaching 119% of GDP in the second quarter of 2026. Analysts nevertheless estimate that the risk of broader contagion remains limited, at 10% to 20%, because of stronger banks, greater integration, and eurozone mechanisms designed to prevent sovereign fragmentation, although investors now view France as a peripheral country.
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