France’s 10-year borrowing rate climbed above 5 percent this week, an awkward backdrop to Marine Le Pen’s promise of earlier retirement.
The far-right presidential frontrunner for France’s 2027 election is offering voters relief from the unpopular medicine of pension reform. But she is also promising creditors €140 billion ($157 billion) in net savings by 2032. Both audiences will expect delivery.
Her predicament reaches beyond France. Populists are promising more generous benefits, lower taxes or both just as borrowing becomes more expensive. Governments that postponed unpopular choices with cheap debt face a less accommodating market.
For parties campaigning against painful reforms, office may require an uncomfortable change of message to something less popular than advertised.
The International Monetary Fund (IMF) says the G7’s average 10-year government bond yield rose by more than a percentage point between February and September to its highest level in almost two decades. High debt, inflation and spending demands make lenders more exacting.
The pressure comes from more than borrowing alone. Aging populations add to pension bills, while demands for defense and energy security compete for the same revenues. Higher taxes or lower benefits would distribute the cost among different groups of voters.
Investment in much-needed new infrastructure adds another line to the bill. Tired old grids and networks, built decades or even centuries ago, are no longer fit for the modern world.
Deficits will survive in general, because a growing economy can borrow without continually increasing debt relative to its income.
But economies must be growing for that to happen, and there is persistent weakness across the G7. The expansion of entitlement obligations also requires far stronger growth to remain sustainable without the imposition of fiscal restraints.
The era ending is the presumption that borrowing can routinely reconcile promises of lower taxes with demands for more spending. Higher interest costs make that bargain harder to sustain. The bond markets are watching deficits closely.
An Expensive Inheritance
The IMF expects French public debt to reach 118.5 percent of GDP this year, with economic growth of just 0.4 percent. Such sluggish growth offers little help in shrinking debt. France’s Treasury projects interest costs rising from 2.2 percent of GDP in 2025 to 3.7 percent in 2030.
As old bonds mature, debts issued cheaply must be refinanced at higher rates. The bill can keep climbing even if central banks eventually cut rates.
Le Pen wants the general retirement age restored to 62, with 60 for some early starters. Scheduled increases under the existing reform have already been suspended until 2028.
Going further would require money that could otherwise reduce borrowing. Her promise to cut the deficit to 3 percent of GDP by 2030 becomes harder to fulfill.
Emmanuel Macron, the outgoing centrist president, torched his approval rating attempting necessary reform. Ironically, this has created the opening for Le Pen. She will inherit the same problems, and eventually the same unpopularity.
America offers a larger version of the problem. The Congressional Budget Office estimated in February that Donald Trump’s 2025 tax and spending law would add $4.7 trillion to deficits over 2026–2035, including interest and economic effects.
Spending reductions elsewhere in the package did not cover its tax cuts and other commitments. Borrowing can finance a tax cut as readily as a benefit.
CBO also projected annual net interest costs of $2.14 trillion by 2036, up from $1.04 trillion in 2026. Those payments would absorb revenue that could otherwise finance services or tax relief.
A growing interest bill leaves Congress fewer attractive choices. Not that it stopped Trump pledging a $5,000 “dividend” to American adults if they elect Republican majorities in November midterms—another deficit-funded populist blowout if it comes to pass.
Choosing Who Pays
Britain’s nationalist-right Reform party, within touching distance of Downing Street, is adjusting its offer.
Its immediate pledge would let people earn £15,000 ($20,000) before paying income tax. Its old £20,000 ($26,750) ambition is conditional on funding. The party estimates the smaller increase would cost £17.7 billion ($23.7 billion) in its first year.
Reform also proposes roughly £50 billion ($67 billion) in annual welfare savings. The Institute for Fiscal Studies (IFS) think tank says important details are missing and previous attempts to tighten disability benefits have saved less than expected. Tax cuts for one group would depend on withdrawing support from another.
In Slovakia, the trade-off is already visible. The European Commission says Robert Fico’s government has weakened its budget consolidation through pension and energy support, the latter covering 90 percent of households.
Meanwhile, the standard VAT rate rose from 20 percent to 23 percent. Protecting popular benefits has coincided with a higher tax on consumption.
There are alternatives to spending cuts. France’s hard-left La France Insoumise proposes €81.7 billion ($91.5 billion) in additional expenditure alongside €106.4 billion ($119 billion) in additional revenue. Its plan puts the burden on taxation, including wealth and inheritance.
The question becomes whether those receipts would materialize, rather than whether the spending has any proposed financing. Wealth taxes have a habit of overpromising and underdelivering. Highly-paid tax advisers know how to earn their crust.
Room To Adapt
High debt does not make a crisis inevitable, though it increases the risk of one.
Economists Zsolt Darvas and Jeromin Zettelmeyer write that indebted advanced economies “still have room to borrow, but there are limits.” Stronger growth could ease the adjustment. Their concern is whether governments can make durable changes before financial pressure forces a harsher response.
Populists can adapt, too. Italy’s Giorgia Meloni has defended fiscal restraint, even as her coalition partner Matteo Salvini demands additional borrowing.
Le Pen’s savings pledge and Reform’s smaller immediate tax promise suggest that the prospect of governing is already changing the sales pitch.
The political difficulty is explaining that change to voters. If promised savings prove illusory, governments may have to raise taxes, trim benefits or seek more borrowing from increasingly skeptical creditors.
Faster growth would help. Treating it as guaranteed would merely postpone the choice.
The next test will come in budgets that identify who pays for each big promise. Populists may discover that winning office was the easier part.