Separated by a strait of no more than 30 miles, France and Britain are countries with vast differences. France boasts of great vineyards, and Britain does not. France has two discrete shorelines and borders several different countries, while Britain has one contiguous shoreline, insulated from the European mainland. Britain has had a relatively stable constitutional monarchy for the past 250 years, during which it has transitioned more or less smoothly from one cabinet to another. Over the same period, France has gone through five republics, a kingdom, fifteen constitutions, and two empires.
Despite these differences, however, an embarrassing similarity between the two countries has recently emerged: Prime Ministers in both countries have struggled to hold onto office. Larry, the Chief Mouser (i.e. the resident cat) of Downing Street, has held onto his office longer than 9 French Prime Ministers and 7 British Prime Ministers. This is in large part due to the dire state of the two countries’ public finances. In particular, both countries have unsustainable debt-fueled spending and a growing sovereign debt burden, trends exacerbated by sluggish economic growth.
In 2026, France reported GDP growth of a mere 0.9%. At the same time, France’s debt-to-GDP ratio has risen to a historic high of 118%, up almost 100% over the last 46 years. Its neighbor, Britain, has not fared much better, even though it exited the European Union for a supposed brighter future in 2020. Currently, Britain’s GDP growth sits at 0.8%, while its national debt sits at 103%. The OECD’s recently published growth forecast for both Britain and France looks grim. The OECD downgraded Britain’s 2027 GDP forecast to 1.0%, while France’s 2027 forecast is 0.8%.
Yield on France’s 10-year bond is now at a record high of 4.6% since 2008, and a full percentage point higher than Germany’s 10-year bond. This pushes France further into a vicious cycle: more borrowing leads to higher future government deficits, which in turn raises debt-servicing costs as investors demand higher interest rates on newly issued bonds. At the same time, the government faces a revised budget deficit of about 163 billion euros, the highest in the eurozone. To illustrate, if Germany and France borrowed 50 billion dollars, the French government would have to spend an additional 500 million dollars just to service the interest, money that could have been spent to support productive sectors or to help reduce the country’s ballooning debt. Instead, they lost the money to interest payments. This does France exactly zero good, especially given its sagging economy.
The British government’s interest spending alone accounted for about 7.7% of the entire government budget, behind only costs for running the government and welfare. The government deficit currently sits at 115.5 billion pounds, or about 8.1% of spending. The yield on the UK’s 10-year bonds is 5.36%, even higher than France’s. Consequently, we can see the effects of higher interest payments yet again–while Britain pays 115.5 billion pounds ($152.92 billion), France pays 64.8 billion euros ($77.78 billion), despite the fact that Britain has a similar amount of national debt as France. Furthermore, both France and Britain now have yields above all of the ‘PIGS’ countries (Portugal, Italy, Greece, and Spain, countries that had trouble refinancing their government debts during the 2008 financial crisis). Two of these countries received IMF bailouts less than twenty years ago.
While European countries and governments may want to write off the crises that high debt and interest rates precipitate for more short-term popularity gains, the same holds true for governments as for households–you have to pay for myopic short-term spending later. As government debt increases relative to GDP, the government needs more money to refinance it, partly because its ratings worsen. Like FICO scores for individual consumers, governments also get a ‘credit score’ from international rating agencies like S&P Global and Moody’s. These ratings are based on several factors, but spending beyond one’s means and taking on more debt can hurt these scores. In fact, Moody’s downgraded France’s sovereign credit rating in late 2024, citing in part a potential negative loop of higher deficit, higher debt, and higher servicing costs. More importantly, over the longer term, if a rating lands in the “junk” category, creditors may no longer wish to extend loans to that country. That day may not be tomorrow for these European countries, but it is wrong to passively wait for it to come or leave the consequences of default and massive service cuts for citizens living the day after tomorrow.
No magic bullet can solve the UK or France’s ballooning debt and low economic growth. The good news is that other countries in worse situations have reversed their dire fates (Greece, for example, which now has a lower yield on its 10-year bond than either France or Britain), but reversing a situation like this requires the governments of both countries to make tough decisions that may be unpleasant and unpopular in the short run. First, countries must have monetary discipline and not try to inflate away their debt when they can–it will only create higher interest rates a few years down the road for future debt. Second, governments need to impose fiscal discipline on their budgets so deficits shrink rather than grow year over year. This may include cutting costly programs, such as an extensive welfare state (France spends the equivalent of 30% of its GDP on welfare). While it is regrettable for a government to have to cut welfare services, it is wrong to leave this generation’s debt and its negative consequences to future citizens. Lastly, the governments must also grow their economy and foster productive industries within their borders. This means cutting the red tape that often prevents companies from making efficient, productive decisions and investing in innovative industries like technology. It is time for the governments of France and the UK (and, more generally, developed nations that have large public debt and low economic growth) to take their own advice they often dole out to developing countries–grow the economy and spend within one’s means.
Image Credit – Denis Healey, Chancellor of the Exchequer, who negotiated Britain’s IMF bailout in 1976 (Wikimedia Commons)
Copyright © 2026 The Princeton Tory. All rights reserved.