French, German, Swiss and Spanish bond yields tell the story of Europe's public finances

The interest rate spread between France and its neighbours measures the deterioration of public accounts with spending close to 60% of GDP and debt of around 120%. The market already charges France almost a point more than Spain to lend it money over ten years.

The snapshot of the debt market leaves an uncomfortable portrait. The French state needs to offer **4.97%** interest to place its ten-year bond. At the same point in the calendar, the Spanish Treasury pays **4.05%**. Germany borrows at **3.41%** and Switzerland, the exception, at **0.5%**. These are four different risk premiums for four economies that share a currency, and the order of the list is no coincidence.

## Public spending close to 60% of GDP

France spends nearly **60%** of what it produces. Its public debt approaches **120%** of GDP and the deficit exceeds **5%** every year. There is no recent memory of a year with balanced accounts. With those ingredients, the rate demanded by investors is not a capricious punishment: it is arithmetic. Two minus three gives the same result in Paris as anywhere else. There are no different mathematics for the eurozone.

The contrast with Switzerland is devastating. The Swiss have a public surplus and debt of around **40%** of GDP. That is why their ten-year bond settles for **0.5%**. The difference between the two countries is not financial culture or prestige: it is the balance sheet. Whoever takes in more than they spend pays little to borrow. Whoever spends 5% more than they take in pays almost five points.

There is a detail worth underlining. The usual narrative attributes the French protests to cuts and austerity. The numbers say otherwise: spending and debt are at record highs. You cannot have half the country subsidized at the expense of the other half indefinitely. The half that pays can no longer shoulder more effort, and buying social peace with unproductive spending has a limit.

## The real cost of each point of interest

Someone might think that paying 5% instead of 1% is not such a big deal. The calculation is quick with a Spanish example. Spain has public debt of more than **one trillion euros**. Each additional percentage point of interest equals roughly **10 billion euros** a year. Four points of extra cost are **40 billion euros** a year. Translated: 60% of public spending on Education, or the equivalent of seventy Equality Ministries.

Per worker, that extra cost is around **2,000 euros** a year. Per inhabitant, more than **800 euros**. And this is only debt servicing, before repaying a single euro of principal. France is not in exactly that situation, but its debt is also enormous and its rate is already the highest of the four compared. The circle is vicious: the more you spend, the more expensive your financing; the more expensive your financing, the heavier the debt weighs on growth; the less you grow, the worse the debt ratio gets.

The comparison with Germany adds another layer. The French pay **1.5 points** more than the Germans for the same money over ten years. Both share the euro, both have the same central bank behind them. The only difference is the quality of their accounts. The market does not reward club membership: it rewards balance.

## When France sneezes, the eurozone catches a cold

The matter goes beyond French borders. A French debt crisis would have serious implications for the entire eurozone. France is not Greece: its economy weighs too much and its debt is spread across the balance sheets of banks across half a continent. If the French rate keeps rising, contagion to other issuers is only a matter of time. And Spain, with its trillion euros of debt, is among the first in line.

That is why it is worth looking at the whole list and not just the French carriage. The Spanish bond at **4.05%** is not good news even if it fares better than the French one. The German one at **3.41%** is not comfortable either. Switzerland, with its **0.5%**, works as a reminder of what can be achieved when the accounts add up. The picture does not show an isolated French problem: it shows a general financial mess in the eurozone, with varying degrees of fever.

The relevant question for a Spanish taxpayer is not how much France is suffering, but how much it costs them for France to suffer. The answer lies in the **40 billion euros** a year that four points of extra cost on Spanish debt would represent. It seemed like a joke at the start. It could end up being a drama, though it sounds somewhat funnier told in French.

## What France teaches anyone willing to look

The French case works as an instruction manual in reverse. A state that takes 60% of GDP, over-regulates and finances its deficit with growing debt ends up paying a price in the market. There is no need to invoke ideologies: it is enough to look at the interest rate investors demand. The spread against Switzerland, **4.47 points**, is the bill for decades of imbalance.

The lesson applies to any Western economy that has turned public spending into a tool for buying tranquillity. The welfare state is not ruined by austerity: it is ruined when the number of people drawing from the system exceeds those who fund it. The law of gravity also exists in public accounts. And France, with its **4.97%**, has just reminded the whole eurozone of it.

None of this constitutes investment advice or a diagnosis of any state's solvency. Interest rates change daily and the figures cited correspond to the moment of publication. For concrete financial decisions, consult a professional.