Europe’s Sovereign Debt Rankings Shift as Belgium Borrows at Rates Near Greece and France Pays More Than Italy

The borrowing-cost hierarchy across the eurozone has changed significantly, with Belgium paying interest rates close to those of Greece and France facing higher borrowing costs than Italy. The shift reflects diverging fiscal positions, political uncertainty and changing investor perceptions of sovereign risk as European governments prepare to issue record volumes of debt.

On 15 October 2026, Belgium’s 10-year government bond yield stood at approximately 4.29%, compared with 4.35% for Greece. France was paying more than Italy to borrow over the same period, reversing a long-standing pattern in which France was considered a relatively low-risk borrower and southern European economies faced higher financing costs.

The change is particularly striking given the eurozone’s experience during the sovereign debt crisis of 2010–2012. At that time, Greece and several other southern European countries faced severe pressure in financial markets, while Germany and France generally benefited from lower borrowing costs. Since then, fiscal adjustments and improved investor confidence have helped several previously high-risk borrowers reduce their relative financing costs.

Greece has made substantial progress in improving its fiscal position. The country recorded a budget surplus equivalent to 1.7% of gross domestic product (GDP) in 2025, while its debt-to-GDP ratio declined by more than nine percentage points during the year. Higher tax collection, improved primary budget balances and efforts to extend debt maturities have contributed to the change in market perceptions.

Belgium, by contrast, has experienced growing fiscal pressure. Its budget deficit reached 5.2% of GDP in 2025, exceeding France’s 5.1%, while public debt rose above 109% of GDP in the first quarter of 2026. Investors have become increasingly sensitive to the country’s financing requirements and the outlook for its public finances.

France faces a separate combination of high debt, persistent deficits and political uncertainty. Its public debt has reached approximately €3.6 trillion, equivalent to around 119% of GDP, compared with 98.2% before the COVID-19 pandemic. Government expenditure represents 57.2% of economic output, placing France among the highest-spending advanced economies.

The French Treasury has announced plans to issue €340 billion in medium- and long-term government bonds in 2027, a record amount and an increase from €310 billion in 2026. A substantial portion of this borrowing will refinance existing obligations as bonds issued during the pandemic and the energy crisis mature. However, refinancing at current market rates will increase the government’s debt-servicing costs.

France paid an average interest rate of 3.55% on medium- and long-term bonds issued during 2026, compared with 3.14% in 2025. Its annual interest bill is projected to increase from €62.6 billion in 2026 to €72.9 billion in 2027. The higher cost of servicing debt will place additional pressure on the government’s budget and limit the funds available for other expenditure unless revenue rises or spending is adjusted.

Other European governments are also preparing to borrow heavily. Germany plans to issue approximately €512 billion in securities during 2026, with financing directed in part towards defence and infrastructure. Italy and Spain face substantial refinancing requirements as well, although their borrowing costs have benefited from changes in relative market perceptions.

The broader environment has become more challenging as global interest rates and government financing needs rise. The International Monetary Fund has warned that borrowing costs across major advanced economies have reached their highest levels in around two decades. Persistent inflation, higher energy prices, geopolitical tensions and substantial investment requirements are contributing to the increase.

The maturity structure of public debt adds to the pressure. The IMF has noted that nearly 30% of public debt in the Group of Seven economies and Spain matures within a year. This means changes in market interest rates can affect government budgets relatively quickly as maturing obligations are refinanced.

The European Central Bank’s monetary policy also influences sovereign borrowing costs. Its deposit rate and expectations about future policy affect the wider interest-rate environment, while the German 10-year bond yield serves as a key benchmark for government borrowing across the eurozone. The German 10-year yield rose from 2.64% in February 2026 to approximately 3.45%, increasing the baseline cost of financing for other member states.

The reduction of central-bank holdings of government bonds has also changed market conditions. During the period of exceptionally low interest rates, central-bank purchases provided a major source of demand for sovereign debt. As those holdings decline, governments must rely more heavily on private investors, whose willingness to purchase bonds can be more sensitive to fiscal outlooks, political developments and expected returns.

France’s position remains different from that of Greece during the earlier sovereign debt crisis. Although its borrowing costs have risen, France has a large and diversified economy, relatively limited external financing vulnerabilities and a debt-servicing burden that remains manageable in absolute terms. Nevertheless, uncertainty over budget policy and the government’s ability to stabilise public debt has contributed to higher yields.

Higher borrowing costs can become self-reinforcing. When investors demand a larger premium to purchase government bonds, refinancing becomes more expensive and fiscal flexibility declines. If markets then become more concerned about the government’s capacity to control its debt, yields can rise further, increasing the pressure on public finances.

The implications extend beyond government budgets. Higher sovereign yields influence financing costs for banks, companies and households, as government bonds provide a benchmark for many other interest rates. Increased debt-servicing expenditure can also reduce the resources available for public investment and services, while higher market rates may affect private-sector borrowing and investment decisions.

The current shift does not, by itself, indicate that the eurozone is entering another sovereign debt crisis. However, it shows that investors are increasingly distinguishing between countries according to the direction of their debt, the credibility of fiscal policy, refinancing needs and political stability, rather than relying solely on historical classifications of northern and southern European borrowers.

With governments preparing large bond issues for 2027, their ability to demonstrate credible budget plans and manage refinancing requirements will remain central to the cost of borrowing across the eurozone.

By fLEXI tEAM