# France says public debt will reach its highest level since 1978 as Lecornu prepares 54 billion euros of cuts

The finance ministry projects debt at 119.3 percent of output this year and 121.7 percent in 2027, while Brazil enters its October election with an unacknowledged adjustment of its own.

- Published: 2026-09-21T05:16:54.216Z
- Canonical: https://polylog.news/2026-09-21/france-says-public-debt-will-reach-its-highest-level-since-1
- Publisher: Polylog (Global desk)
- Section: macro
- Sources: [Euronews](https://www.euronews.com/business/2026/09/21/france-debt-set-for-highest-level-since-1978-as-fiscal-strain-grows), [MercoPress](https://en.mercopress.com/2026/09/21/the-pending-fiscal-adjustment-dominates-the-final-stretch-of-brazil-s-presidential-race)

France's finance ministry expects public debt to reach [119.3 percent of gross domestic product this year and 121.7 percent in 2027](https://www.euronews.com/business/2026/09/21/france-debt-set-for-highest-level-since-1978-as-fiscal-strain-grows), the highest share since 1978 and more than double the 60 percent reference level that European Union members are meant to aim for. Only Greece and Italy carry a heavier burden within the euro area.

Prime Minister Sébastien Lecornu has put together adjustments and cuts worth 54 billion euros, about 62 billion dollars, for the 2027 budget. He has left the most politically sensitive items, including a proposal to reduce tax relief for pensioners, to parliament. The chair of the National Assembly's finance committee has objected that the package taxes all income groups at similar rates and therefore falls hardest on the poorest, [according to reporting on the ministry's figures](https://www.bangkokpost.com/world/3322915/frances-debt-climbs-to-highest-since-1978-ministry).

Brazil faces the same arithmetic from the opposite starting point. The economy is growing and unemployment is at what MercoPress describes as [record lows, yet the campaign before the October 4 vote is dominated by the spending cut](https://en.mercopress.com/2026/09/21/the-pending-fiscal-adjustment-dominates-the-final-stretch-of-brazil-s-presidential-race) that analysts and business leaders agree will fall to the winner, whoever that is. Neither major candidate has set out the details.

Two very different states have arrived at the same position. Years of deficits financed at suppressed interest rates left both with a debt stock that only grows more expensive as it is refinanced at current yields, and in both cases the adjustment is being deferred past an election. Delay does not reduce the required correction. It changes who imposes it, from a parliament choosing the composition of cuts to a bond market choosing the price of refinancing.

## What this means

French borrowing costs and the spread between French and German government bonds are the transmission point, because a budget that parliament dilutes leaves the debt path unchanged and forces investors to demand more yield for holding duration. European banks and insurers hold large amounts of French sovereign debt, so a repricing there reduces their capital before it affects anyone else. Brazilian assets face the reverse situation. Local interest rates already reflect an adjustment the candidates have not described, and the currency will react to whichever version of it the winner adopts in the first budget.

## What to watch

- The yield gap between French and German ten-year government bonds, the market's running verdict on whether the 2027 package is credible.
- Whether the French parliament keeps or strips the pensioner tax measure, which will show how much of the 54 billion euros survives contact with an election campaign.
- Whether either Brazilian presidential candidate names specific spending cuts before October 4, since silence pushes the adjustment into the new term and onto the currency.