Greek bonds have reached a historic milestone by closing the yield gap with French bonds. This reflects Greece’s fiscal reforms and resilience, while French bonds face pressure due to political uncertainty and economic challenges.

From Crisis to Confidence: Greece’s Turnaround

During the eurozone debt crisis, Greece’s 10-year bonds yielded nearly 40 percentage points more than France’s. At that time, Greece was struggling with a debt over 175% of GDP, austerity measures, and fears of default.

Today, Greece has rewritten its economic story. In late November, Greece’s 10-year sovereign bonds yielded below 3%, aligning with France’s OAT bonds. This shift reflects Greece’s fiscal recovery and growing investor confidence.

The driving factors behind Greece’s success include fiscal discipline, economic reforms, and resilience. Analysts point to Greece’s primary budget surplus, expected to reach 2.4% of GDP this year, as key to its performance.

“Private consumption and investment are driving growth,” said Bank of America analyst Athanasios Vamvakidis. Greece’s debt is mostly fixed and low-interest, which shields it from rising interest rates. The Greek banking sector also shows positive outlooks, with major banks like Eurobank, Piraeus, and Alpha Bank receiving Buy ratings.

Challenges Facing France’s Bonds

In contrast, French bonds face mounting pressure. The yield on 10-year OATs rose to 2.945%, reflecting an 81.7-basis-point premium over German Bunds. France’s fiscal difficulties and political uncertainty are at the core of this challenge.

Prime Minister Michel Barnier’s government faces backlash over €60bn in proposed spending cuts. Political deadlock threatens fiscal reforms, while elections could delay needed decisions. Goldman Sachs analyst Alexandre Stott warned that reducing France’s budget deficit from 6.1% of GDP to 5% is a “tall order.”

Moreover, France’s debt-to-GDP ratio is set to rise to 118% by 2027, due to tax hikes and consolidation efforts.

Greece vs. France: Structural Divergence

Greece’s economic growth stands in contrast to France’s struggles. Greece is expected to grow by 2.3% in 2025, while France’s growth will slow to 0.8%.

This divergence extends to public debt. Greece’s debt-to-GDP ratio is set to fall, while France’s will rise steadily in the coming years.