Bank of France chief says debt answer lies at home

The Bank of France chief said on Wednesday that rising French borrowing costs are serious but do not yet call for European Central Bank support.

Bank of France head Emmanuel Moulin described the country’s economic situation as serious. However, he told a French radio station that the answer lay at home rather than in Frankfurt. “The solution is here at home,” he said. He added that he did not believe the European Central Bank needed to step in under present conditions.

Moulin linked the gap in borrowing rates to two problems. First, France runs “a deficit which is higher than that of other countries” in the euro zone, he said. Second, he pointed to political uncertainty over the budget vote. Therefore, he said, the government must get its budget through parliament.

According to Moulin, passing a budget that cuts the deficit could ease the pressure on France.

His comments came a day after far-right leader Marine Le Pen called for talks with the ECB about easing French borrowing costs. She tied that step to a future point when France has its public finances back under control. Asked about her idea, the Bank of France chief said it fell outside the ECB’s role. “Simply, the ECB’s mission is fighting against inflation,” he said. “Today, we are beyond our target of 2%,” he added.

Le Pen, the frontrunner in next year’s presidential election, set out her main budget plans on Tuesday. Her targets put the deficit under 3% of GDP in 2030, then under 2.5% two years later. In addition, her plan includes spending cuts of 140 billion euros by 2032, a figure net of tax cuts worth at least 30 billion euros. She also wants public debt to fall to 112% of GDP by 2032, down from around 121% in 2027.

French borrowing costs have surged during the current global bond rout, and the euro has slid as a result. Against the dollar, the euro hit its weakest level in 17 months on Monday. Investors fear that weak French public finances could weigh on the rest of Europe.

Relief in the bond market proved brief. French 10-year yields rose about 7.8 basis points on Wednesday, to around 4.864%. Meanwhile, the spread over German Bunds widened back toward 137 basis points, from about 130 at the close on Tuesday. The euro traded near $1.1236.

Prime Minister Sebastien Lecornu’s government faces pressure from opposition parties on both the far right and the far left before the presidential election. Its target is a deficit worth 5% of economic output in 2027, down from 5.4% this year. Ministers presented the draft budget for 2027 on October 1. Notably, budget battles brought down both of Lecornu’s predecessors, in 2024 and 2025.

The wider numbers remain tough. Last year, the French deficit equalled 5.1% of GDP. Government debt, meanwhile, stood at 119% of GDP when June ended. France also sits under the EU’s excessive deficit procedure, which asks the country to bring its deficit back within agreed limits by 2029.

Mitch Reznick of Federated Hermes said markets increasingly treat French debt “less like core Europe and more like the periphery.” Still, he does not expect the ECB to intervene directly for now. However, he said the central bank could change its tone if spreads keep widening.

For now, the Bank of France chief has placed the burden on lawmakers. In his view, a deficit-cutting budget in parliament offers the clearest route to calmer markets.