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Greek sovereign bonds have achieved a historic milestone, closing the yield gap with France. This reflects Greece’s fiscal reforms and economic resilience. French bonds, in contrast, face pressure from political uncertainty and rising deficits.

From Crisis to Confidence

During the eurozone crisis, Greek 10-year bonds yielded nearly 40 percentage points more than France’s. Back then, Greece was burdened with debt exceeding 175% of GDP and austerity measures. The possibility of Greece exiting the eurozone was real.

Twelve years later, Greece’s economic turnaround is clear. As of November 2024, Greece’s 10-year sovereign bonds yield under 3%, matching France’s. Investors now receive the same return for lending to both countries.

This change highlights Greece’s fiscal discipline and economic stability. Meanwhile, concerns grow about France’s fiscal and political future.

Factors Driving Greece’s Bond Success

Greece’s bond market performance stems from fiscal discipline, economic reforms, and resilience to high interest rates. Analysts credit Greece’s sustained fiscal overperformance. The country’s primary budget surplus is expected to hit 2.4% of GDP, exceeding the target.

Private consumption and investment are driving growth, according to Bank of America analyst Athanasios Vamvakidis. Greece’s public debt is largely fixed, with an average maturity of 20 years. This shields it from rising interest rates.

The Greek banking sector also benefits from this positive outlook, with analysts upgrading major banks like Eurobank, Piraeus, and Alpha Bank.

French Bonds Struggle Amid Fiscal and Political Challenges

In contrast, France faces growing fiscal and political challenges. The yield on French 10-year OATs reached 2.945%, an 81.7 basis point premium over German Bunds. This rise is due to the country’s budget deficit and political instability.

The government’s €60bn spending-cut proposal faces opposition. Parliamentary elections next July could lead to political deadlock, complicating fiscal reforms.

Goldman Sachs analyst Alexandre Stott warned that reducing France’s deficit will be difficult. The government’s reliance on tax increases may push its debt-to-GDP ratio to 118% by 2027.

Diverging Economic Futures: Greece vs. France

The contrasting paths of Greece and France reflect deeper structural differences. Greece is one of Europe’s most dynamic economies, with improved creditworthiness and fiscal discipline. By contrast, France struggles with aging demographics, high energy costs, and low productivity.

Eurostat forecasts that Greece’s economy will grow by 2.3% in 2025, up from 2.1% in 2024. Meanwhile, France’s growth is expected to slow to 0.8% in 2025, down from 1.1% in 2024.

Greece’s public debt-to-GDP ratio is projected to decline significantly, while France’s is set to rise.