Greek sovereign bonds have achieved a major milestone, narrowing their yield gap with France’s bonds to almost zero. This development reflects Greece’s fiscal discipline, economic reforms, and resilience amid global economic challenges.
During the eurozone debt crisis, Greek 10-year bonds yielded nearly 40 percentage points higher than France’s bonds. Greece faced default, carrying debt over 175% of GDP and implementing severe austerity measures. Now, Greece’s 10-year bond yields have fallen below 3%, matching yields on France’s OAT bonds.
This turnaround highlights Greece’s fiscal stability, driven by a primary budget surplus projected at 2.4% of GDP this year. Analysts credit robust private consumption, investment growth, and low-interest public debt for insulating Greece from rising interest rates. The strong performance extends to Greek banks, with positive ratings on institutions like Eurobank and Piraeus Bank.
France Struggles with Fiscal and Political Challenges
In contrast, France’s bonds have faced rising yields due to fiscal strain and political uncertainty. By late November, France’s 10-year OATs carried an 81.7-basis-point premium over German Bunds. Prime Minister Michel Barnier’s €60 billion spending cuts have sparked backlash, further complicating fiscal reforms.
Goldman Sachs projects France’s debt-to-GDP ratio will rise to 118% by 2027, amid challenges in reducing the budget deficit. Political fragility, including opposition from Marine Le Pen’s National Rally, adds to the fiscal headwinds.
While Greece demonstrates resilience and steady growth, France grapples with slowing productivity, ageing demographics, and high energy costs. Projections show Greece’s economy growing by 2.3% in 2025, while France lags at 0.8%. Greece’s declining debt contrasts with France’s rising debt, reflecting divergent paths within the eurozone.