Greek sovereign bonds have achieved a historic milestone, matching French yields and reflecting Greece’s economic recovery and fiscal discipline. Once the epicenter of the eurozone debt crisis, Greece has transformed its financial standing over the last 12 years.

During the crisis, Greek 10-year bonds yielded nearly 40 percentage points more than French bonds as Greece faced possible default. By late November, Greece’s 10-year bonds yielded below 3%, aligning with France’s OAT bonds. Investors now see equal compensation for lending to both countries.

Greece’s fiscal turnaround stems from disciplined budgeting, economic reforms, and resilience to high interest rates. Analysts expect Greece’s primary budget surplus to hit 2.4% of GDP in 2023, exceeding its target.

Most of Greece’s public debt is held under low-interest, long-term terms, insulating it from rate hikes. Greek banking stocks have also gained investor confidence, with major institutions like Eurobank and Alpha Bank receiving Buy ratings.

France Grapples with Fiscal and Political Challenges

While Greece benefits from improved market sentiment, France’s bonds face mounting pressure. French 10-year OAT yields climbed to 2.945% in late November, reflecting rising fiscal and political risks.

Prime Minister Michel Barnier’s government faces public backlash over proposed €60 billion spending cuts. With parliamentary elections possible in July, political gridlock could stall reforms.

France’s budget deficit, at 6.1% of GDP, remains far from its 5% target. Analysts predict France’s debt-to-GDP ratio will rise to 118% by 2027, complicating fiscal recovery.

The divergence between Greece and France highlights structural differences. Greece’s economy is growing steadily, with debt-to-GDP ratios projected to fall significantly by 2026. Meanwhile, France struggles with stagnant growth, rising debt, and limited reform capacity, underscoring broader economic challenges.