France is heading toward a debt disaster and has long passed the point of no return. Now, Finance Minister Éric Lombard is warning of a potential bailout scenario for the EU’s second-largest economy.
Sovereign debt crises do not appear overnight. They are the result of years—often decades—of political mismanagement, gradually pushing public finances toward collapse. France is a prominent example.
The country, which prides itself on addressing social fractures through its welfare system, has reached a point where the private sector can no longer finance the state bureaucracy, unbridled migration, and the tightly woven social safety net.
With a public sector share of 57 percent of GDP, the insatiable state apparatus crowds out private investment, driving the economy into a productivity crisis. In this mode, growth is virtually impossible. On top of this, France’s public debt has reached dizzying heights of 114 percent of GDP, with the budget deficit projected at 5.4 percent for this year.
Alarms have long been sounding in Paris and Brussels. France threatens to drag the fragile structure of the Eurozone—and therefore the EU—into the abyss.
Reforms Likely to Fail
French Prime Minister François Bayrou attempted to pull the emergency brake with a new austerity package. However, a parliamentary deadlock and the ever-present threat of social unrest in France’s banlieues paralyze the country.
Bayrou’s plan includes €44 billion in savings, eliminating two public holidays—such as Easter Monday and May 8—to boost productivity without raising taxes or VAT. The government also intends to freeze social spending, cut the public sector, and introduce a solidarity tax on the wealthy.
Speaking before the summer recess, Bayrou warned, “This is the last stop before the cliff before debt crushes us”—a stark, possibly final warning before France’s treasury faces pressure in the bond markets.
Yet the political reality is unforgiving: Without a clear majority in parliament—his camp is fragmented, and left- and right-wing opposition parties reject the package outright—the plan is doomed. At the same time, the prospect of a general strike or street protests—similar to the Yellow Vests—creates an atmosphere in which any minimal reform attempt risks escalating into social upheaval.
Finance Minister Issues Further Warning
The date of September 8, 2025, is becoming increasingly important. On that day, a confidence vote in the French parliament regarding Bayrou’s austerity package is scheduled. This day could topple the already fragile minority cabinet. Just two days later, on September 10, nationwide protests are planned.
A movement called “Blocquant tout” (Block Everything) and the campaign “Mobilisation 10 Septembre” have called for a general strike. Supermarkets, rail transport, and roads will be paralyzed nationwide. These are critical days for France and the European Union, which would almost certainly not survive a state bankruptcy.
France, and by extension the EU’s entire framework, teeters dangerously close to a new debt crisis. On August 25, Finance Minister Lombard admitted to The Telegraph that even an intervention by the International Monetary Fund could no longer be ruled out.
“It is a scenario we urgently want to avoid—but we cannot completely exclude it,” the minister said. The atmosphere sounds apocalyptic.
Markets Grow Nervous
Financial markets are reacting with alarm. French government bond yields have climbed to their highest levels since 2011. Lombard made clear that only through strict budgetary discipline in 2026 can market confidence be restored. Otherwise, a collapse looms: France, a founding member of the Eurozone, could at worst have to call the IMF—a historic taboo, which would accelerate Europe’s decline.
The 10-year French government bond yield, the most important reference rate, has risen from its August 2019 low of -0.44 percent to 3.5 percent. With public debt totaling €3.3 trillion, France can no longer finance itself. It is highly likely that emergency interventions, liquidity facilities, and bond-purchase programs—used in the crisis a decade and a half ago—are already prepared in the Frankfurt ECB Tower to prevent a collapse.
Claims vs. Reality
The ECB continues to intervene massively in the European bond market and has long been buying US Treasuries to prevent the interest rate gap between the US and Eurozone from widening and to suppress capital flight. This policy acts as palliative care, but the reality is far more dramatic than stock prices suggest.
In this context, Brussels’ attempt to organize national debt consolidation under the EU Commission through the establishment of a European war economy and Eurobonds, aiming to create pan-European creditworthiness in the market, is understandable.
EU states have long exhausted their potential to prevent a debt crisis through autonomous fiscal policies, due to their welfare models, unchecked migration, and self-inflicted productivity and energy crises.
The attempt to replace the lifeless private economy with a Keynesian-style “green economy” via the Green Deal and green transformation has failed. In the end, a debt crisis looms that cannot be resolved by simple bailouts or central bank interventions.
Brussels’ last hope—that US failure could serve as cover for its own bankruptcy—has also collapsed. Washington is actively managing both revenues and expenditures to control its problems. And one must not forget: the US remains the issuer of the world economy’s most important settlement vehicle—the US dollar and dollar-denominated government bonds—whether one likes it or not.
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Thomas Kolbe, born in 1978 in Neuss/ Germany, is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination. Follow him on Twitter/X: https://x.com/ThomKolbe.