France intends to borrow record €340 billion as Covid-era debt comes due

France indicated Tuesday it plans to borrow a record amount on the bond market next year, even as worries about the government's spending has seen borrowing rates hit levels unseen since the global financial crisis.

The AFT agency that manages the government's borrowing on debt markets said it plans to borrow 340 billion euros ($385 billion) in 2027, some 28 billion euros more than this year, to help finance government spending and repay debt coming due.

AFT, in its announcement two days ahead of the presentation of the government's 2027 budget, said it plans to issue a mixture of medium- and long-term bonds to raise the funds.

The French government is forecasting an interest rate of 4.3 percent for its 10-year bonds in 2027.

On Tuesday, French 10-year bonds were trading on the secondary market at 4.8 percent.

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In recent weeks the yields on French government debt have hit levels last seen during the global financial crisis.

Investors have become increasingly concerned about the size of France's debt, but also the latest data which has shown the government has been unable to reduce deficit spending.

France's public deficit – the annual shortfall of revenue to spending – came in at 5.1 percent of GDP last year and instead of reducing that level as originally planned the government now forecasts it will hit 5.4 percent this year.

Under EU rules, the public deficit is meant to be no more than three percent of GDP.

The higher interest rates on its debt means that the French government has to pay investors more to borrow, leaving it with less funds for current spending.

France's prime minister Sébastien Lecornu vowed earlier this month to cut the deficit next year without resorting to austerity, but with presidential elections just months away the government will be hard pressed to cut spending.