How did Greece end up borrowing more cheaply than France?

In March 2012 the Greek state had to pay a market yield of close to 40% on its outstanding ten-year bonds, effectively shutting it out of normal market borrowing. Even at that price, it found few takers.

That same month, France raised ten-year money at under 3%. Fourteen years later the two have swapped places.

France's 10-year yield, the rate Paris pays to borrow for a decade, is trading near 4.50%. Athens pays about 4.28%.

Investors are now demanding more interest to lend money to Paris than to Athens. The gap is small. What it says is not.

Greece still owes more relative to the size of its economy than almost any country in Europe, while the French economy is more than ten times larger, richer and far more diversified.

On paper the pricing makes no sense. It makes sense once you accept that bond investors have stopped treating the size of a debt pile as the whole story.

What they weigh now is the direction it is moving, how often it has to be refinanced, and whether a government has the political room to stop adding to it.

On all three, Greece and France are pulling apart.

Greece owes more, but the pile is shrinking

At the end of the first quarter, Greek public debt stood at 143.5% of annual output, against 117.6% in France.

Those are the numbers that flatter Paris, and they are the only ones that do.

Over the previous twelve months Greece's debt-to-GDP ratio fell by 9.4 percentage points. France's rose by about four.

The European Commission expects Greece to keep falling, from 146.1% in 2025 to 134.4% by 2027. It expects France to climb above 120% over the same period.

The budget picture is starker still.

Greece closed last year with a surplus worth 1.7% of GDP and is forecast to stay in the black through 2027. France ran a deficit of 5.1%, one of the widest in the European Union, and this year's is getting away from it.

And the French number is getting worse, not better.

On 11 September, Finance Minister Roland Lescure halved the government's 2026 growth forecast to 0.5% and abandoned the 5% deficit target the budget had been built on.

"Five percent is no longer an option," he told reporters, declining to put a new figure in its place.

The statistics office INSEE is gloomier still at 0.4%, and calls France the only large advanced economy expected to slow this year. Greece is growing at close to 2%.

Why Greece’s enormous debt is less dangerous than it looks

Not all debt behaves the same way, and Greece's behaves unusually well.

Most of it was created by the bailouts, which means it is owed to European public institutions rather than to fund managers who can sell at the first bad headline.

The loans run for decades at concessional rates. Greece's Public Debt Management Agency puts the average maturity above 18 years and the annual cost of servicing the stock at 1.94% as of the end of June.

Almost the whole Greek debt is fixed-rate.

Picture a household that fixed a very long mortgage when money was cheap. Rates can climb all they like; the monthly payment does not move.

France does not have anything like that duration of fixed-rate protection.

Bonds sold in the era of near-zero rates keep maturing and keep being replaced at today's cost. Interest payments are on course for €65 billion this year, some €4.5 billion above budget, which makes debt service the single biggest item of state spending.

The Cour des Comptes, the public audit body, has warned the bill could approach €100 billion by 2029.

Economists call the mechanism a snowball.

Once borrowing costs rise faster than the economy grows, debt climbs on its own unless the state runs a surplus before interest, and the OECD has warned that without policy changes French debt could reach about 200% of GDP by 2050.

One country sells €8 billion of bonds. The other sells €310 billion.

Then there is supply. France plans to issue €310 billion of medium and long-term bonds in 2026, net of buybacks.

Greece plans to issue only about €8 billion of bonds this year. It is also repaying roughly €13 billion early, helped by cash reserves of close to €40 billion.

A bigger economy naturally borrows bigger sums, but the market still has to absorb them auction after auction, and a market that has to absorb can name its price.

Political risk has changed address

The ratings capture the reversal.

Greece, which spent much of the previous decade below investment grade, is now investment grade at every major agency. S&P Global and Fitch rate it BBB, while Moody's rates it Baa3. All three have stable outlooks, while several smaller agencies have positive outlooks.

France remains more highly rated. But the direction has changed there as well. S&P and Fitch currently rate France A+. Moody's rating is Aa3, with a negative outlook.

Ratings agencies are not suggesting France is close to default. The concern is more mundane: repeated large deficits, slow growth and limited political agreement over how to reduce spending or raise revenue.

France's fragmented parliament has made that task harder. The presidential election next spring adds another layer of uncertainty.

None of this makes France the new Greece

Nobody is pricing a French default. Paris commands deep markets, a large domestic savings base and a tax capacity Athens could only envy in 2012, and its credit standing remains several notches higher.

What the crossover marks is a change in what investors reward. Falling debt, budget surpluses and a quiet refinancing calendar now buy a discount. Rising deficits, heavy issuance and a deadlocked parliament carry an additional charge on interest rates.

In 2012, investors were pricing in the possibility that Greece would still be using the euro by Christmas. In 2026, the more immediate question is how much further Athens can reduce its debt.

France faces almost the opposite one: how long can debt keep rising before investors demand an even higher price to finance it?