France's economic problems, marked by high public deficit, rising debt, difficulties in approving budget adjustments and street protests, raise questions about the risks for other European economies. XTB considers that the neighboring country is going through a situation that entails risks of contagion for other economies.
Why is France worrying the markets?
The risk premium demanded by investors for French bonds with a ten-year maturity compared to the German 'bund' exceeded 170 basis points this Thursday, the largest gap between both references since November 2011. The yield of the ten-year French bond exceeded 5% and reached its highest level since 2002.
XTB maintains that France is making decisions that may aggravate its imbalances, by maintaining spending commitments while markets demand measures to contain debt.
The firm believes that a sudden adjustment could intensify protests, weaken consumption and make the approval of reforms even more difficult. However, it warns that responding with new aid without "credible financing" would increase borrowing needs and could fuel further increases in debt yields.
Likewise, XTB points out that France has spending commitments that are difficult to modify, such as spending on pensions, and adds that the low economic growth complicates the possibility of meeting its financing needs with greater collection.
Can Spain find itself in a similar situation?
Spain presents a more favorable situation than France in fiscal terms, with a lower weight of public spending on GDP, a public debt and deficit that have followed a downward trajectory in recent years, and greater economic growth.
public spending
Specifically, in 2025 public administration spending represented 45.3% of Spanish GDP, compared to 57.3% of French GDP, which represents a gap of 12 percentage points, according to Eurostat data.
Public deficit
The difference is also observed in the public deficit. According to Eurostat data corresponding to 2025, Spain recorded a deficit equivalent to 2.4% of GDP, while the French figure reached 5.1%. The gap is 2.7 percentage points.
Recent evolution also favors Spain in this indicator. The Spanish deficit went from 4.6% of GDP in 2022 to 2.4% in 2025. In France, on the contrary, it increased from 4.7% to 5.1% during the same period, after having reached 5.8% in 2024.
Public debt
Public debt also reflects a more favorable situation for Spain in relative terms, although it remains at high levels. Eurostat places Spanish debt at 100.5% of GDP in 2025, compared to 115.7% for France.
In Spain, the debt ratio fell from 109.3% of GDP in 2022 to 100.5% in 2025. In France, on the other hand, it increased from 111.4% to 115.7% in that period.
Along these lines, public debt will fall below 100% of GDP this year for the first time since 2019, since the IMF estimates that it will represent 97.6% of GDP and that it will continue to reduce in each of the following projected years, reaching 89.4% of GDP by 2031, which would be the lowest proportion since 2012.
Economic growth
The Spanish economy will continue to grow above the euro zone average over the coming years, at least until 2031, according to the longer-term projections of the International Monetary Fund (IMF). The organization estimates a growth in gross domestic product (GDP) of 2.5% in 2026 and 1.8% in 2027.
What vulnerability does the Spanish economy present?
The Bank of Spain has identified public debt as a vulnerability of the Spanish economy, despite the reduction in the debt ratio. Given the greater spending needs linked to aging, defense, energy transition and climate adaptation, it has called for combining a credible path for public accounts with a composition of income and expenses that favors investment, employment and productivity.
However, he highlighted that Spain faces this stage with a solid asset and financial position of households, companies and banks, both in historical perspective and in comparison with the euro area, thanks to the cleaning up of its balance sheets after the previous crisis.
For its part, XTB warns that economic growth alone does not guarantee an improvement in the well-being of citizens. According to the firm's calculations, between 2015 and 2025, housing prices increased by 80.6% in Spain, while the average nominal salary increased by 29.9%.
In France, both evolved in a much more balanced way: housing rose by 27% and salaries by 24.4%. This means that the relationship between the price of housing and the average salary worsened by 39% in Spain, compared to 2% in France. For this reason, the firm considers it a priority to increase the supply of housing and increase productivity to sustain better salaries.
What risks does Spain face due to the aging of the population?
The demographic challenge constitutes another of XTB's warnings. Spain registered a fertility of 1.10 children per woman in 2024, the second lowest in the European Union, according to data estimated by the firm. XTB warns that this aging will increase spending needs on pensions, health and care.
