German Economists Warn France Must Face Its Debt Problem

German economist Heribert Dieter has warned that France must finally come to terms with the seriousness of its financial situation, reflecting mounting unease in Germany about the trajectory of French public debt.

At the centre of the concern is the performance of French sovereign bonds, known as OAT, which are issued by the government to finance its spending. These bonds currently offer investors a yield of 4.9 percent. According to recent analysis, an investor holding the bond until its maturity in 2036 would earn twice as much as someone who placed their money in Livret A, France's widely used regulated savings account. The gap underscores how much the market now demands in return for lending to the French state.

A rising yield typically signals that investors perceive greater risk in a borrower's ability to repay its obligations, and analysts have pointed to this widening gap as evidence of eroding confidence in France's fiscal trajectory. The comparison with Livret A, a savings vehicle widely trusted by ordinary French citizens, has struck a particular chord, illustrating just how differently markets and households currently assess risk.

Monika Schnitzer, a prominent German economist, weighed in on the broader question of responsibility should the situation deteriorate further. She argued that, in the event of a debt crisis, the response must originate from France itself rather than from the European Union or its institutions. Her remarks suggest limited appetite in Germany for any collective European response to French fiscal troubles, reinforcing the principle that member states remain primarily responsible for managing their own public finances.

The statements from both economists arrive amid heightened scrutiny of France's budgetary position, as the country grapples with a persistent deficit and calls for structural reform. While neither economist detailed specific policy measures, their comments reflect a wider debate within the eurozone about fiscal discipline, solidarity, and the limits of European support when individual member states face mounting debt pressures. The remarks are likely to add pressure on French policymakers as they prepare upcoming budgetary decisions.