Imagine an investor who fell asleep in the summer of 2012, at the height of the euro crisis, and woke up this morning. He would remember a simple map. In the north, a core of countries that borrowed cheaply, with Germany at the centre. In the south, a periphery of debtors – Greece, Portugal, Spain, Italy, Ireland – that paid dearly for the privilege of staying in the single currency. Fourteen years later, that map no longer describes the eurozone.
Belgium, home to the European Union institutions, now borrows for ten years at 4.29%. Greece, bailed out three times, pays 4.35%, almost the same rate. Portugal, rescued in 2011, pays less than Spain. Ireland, rescued in 2010, pays almost the same as the Netherlands. And France, which he remembered as part of the core, pays more than Italy.
The old periphery has moved north. That is the backdrop against which eurozone governments are about to ask investors for more money than ever before.
What moved the border
Bond yields are the interest rates a government pays to borrow. They rise when investors think a country will need more money than it can comfortably repay, and they fall when it proves the opposite. Greece has spent a decade proving the opposite.
In 2025, Athens ran a budget surplus of 1.7% of gross domestic product (GDP), and its debt, though still the highest in Europe, fell by more than nine percentage points of GDP in a single year.
“For years, when markets talked about sovereign risk in Europe, the focus was usually on the periphery,” Ken Egan, head of European sovereign credit at the rating agency KBRA, told Euronews.
Over the past decade, he said, those countries have followed more prudent fiscal policy, improved their primary balances, extended debt maturities, collected taxes better through digitalisation and rebuilt their banks.
“That has helped smooth refinancing risks and put debt on a much firmer path than 10 or 15 years ago.”
Belgium went the other way. Its deficit widened to 5.2% of GDP last year, larger than France’s 5.1% in the same year, and its debt rose above 109% of GDP in the first quarter of 2026. Investors noticed.
“The traditional core has changed as well, but in a different direction,” Egan said.
“In some cases there is less clarity around the policy path, more political uncertainty, rising structural spending pressures and much higher refinancing costs than governments had become used to during the low-rate period.”
France’s position on the map is defined by one figure above all: the state spends 57.2% of everything the economy produces, the highest share in the G20.
Debt has reached €3.6 trillion, or 119% of GDP, up from 98.2% before the pandemic.
The bill that comes due in 2027
On 29 September, the French Treasury set out how much it will need to borrow next year: €340 billion in medium- and long-term bonds, a record, equal to about 11% of GDP and up from €310 billion this year.
Much of it is not new spending but old debt coming back for refinancing, as bonds issued during the pandemic and the energy crisis mature.
Every euro of that debt is being renewed at a higher price.
France has paid an average interest rate of 3.55% on medium- and long-term bonds issued so far this year, up from 3.14% last year. Its annual interest bill is forecast to rise from €62.6 billion in 2026 to €72.9 billion in 2027, roughly a fifth of what the state collected in revenue last year.
That last number is the one investors now read first.
“Markets are looking much more closely at the fiscal story, and not just at how much governments are borrowing, but what they are borrowing for,” Egan said.
“Borrowing that supports investment and future growth is one thing; borrowing mainly to cover a rising interest bill is viewed quite differently.”
Germany is issuing a record €512 billion of securities this year, but to pay for defence and infrastructure, which is the kind of borrowing markets forgive.
Italy and Spain will each refinance several hundred billion.
And the IMF, in its latest World Economic Outlook, points to a detail that makes every government more exposed: in the G7 and Spain, nearly 30% of public debt now matures within a year, so a change in interest rates reaches the budget within months rather than decades.
Why sovereign yields keep rising
Between February and September, the average 10-year yield across the G7 rose by more than a full percentage point to its highest level in nearly two decades, the IMF’s fiscal chief Rodrigo Valdés and his deputy Era Dabla-Norris wrote this week.
The oil shock, persistent inflation and the money pouring into artificial intelligence all played a part. But at the centre, they wrote, are fiscal fundamentals: investors demand more to lend for ten years to governments that keep spending more than they collect.
The European Central Bank (ECB) has added to the cost, raising its deposit rate twice this year to 2.50% to contain inflation.
The German 10-year yield, the floor for the whole eurozone, has climbed from 2.64% in February to 3.45%. France’s has risen twice as fast and briefly touched 5% in early October, the widest gap with Germany since 2012.
The danger, Egan said, is that the market itself becomes part of the problem.
“A political headline or weak budget can push the curve higher, refinancing becomes more expensive, fiscal space narrows, and the market then has another reason to demand a higher premium.”
That loop turns faster than it used to, because the buyers have changed.
For a decade the ECB bought government bonds with newly created money; now it lets them run off.
“There is less natural long-duration demand in the market, with central banks stepping back, pension demand changing and more of the marginal buying coming from price-sensitive investors,” Egan said. Higher energy prices, he added, make it worse by “weakening growth while keeping inflation and rates higher”.
The IMF describes the result in one sentence: in a growing number of countries, the interest rate on new debt is now higher than the growth rate of the economy.
When that happens, debt rises on its own unless the government runs a surplus before interest.
Most of Europe does not. “The more countries wait, the more painful the adjustment becomes,” the Fund wrote.
Is this 2012 again?
Not yet, says Lombard Odier. The Swiss bank’s investment office argues that markets are “pricing uncertainty rather than the conditions for a new sovereign debt crisis”. France’s interest payments remain affordable, at slightly above 2% of GDP, half Italy’s.
Its current account deficit is small, and it does not depend on foreign money the way Portugal, Spain and Greece did in 2012, when they imported capital worth 7% to 12% of their economies every year.
The bank’s forecast is dull rather than dramatic: French spreads stay wide until a credible budget passes parliament, probably not before the May 2027 presidential election, and the euro drifts lower, to $1.09.
Clara Raposo, vice-governor of the Banco de Portugal, offered a different warning this month.
Sovereign bond markets, she said, have become more sensitive to inflation, fiscal doubts and geopolitics, and shocks now spread faster from one country to another, amplified by funds that sell first and ask questions later.
“Trust may be intangible, but its economic consequences are real,” Raposo said.
Your debt, my inflation
The transmission is not only financial.
A randomised experiment with German firms in the Bundesbank’s panel, which surveys roughly 7,000 firms, published by the Centre for Economic Policy Research (CEPR) earlier this year, found that half of them think the ECB will hold back on rate rises to protect weaker treasuries.
When researchers showed them a pessimistic forecast for the average debt-to-GDP ratio of France, Italy and Spain, the firms raised their expectations for German inflation three years ahead by 1.4 percentage points among those who distrust the ECB.
Fiscal stress in one member state, in other words, can raise inflation expectations in another, and the channel is trust.
In 2012, the question was whether the periphery could pay. In 2027, the question is who, exactly, the periphery is.