France's national debt surpasses GDP, finance minister maybe heading for IMF bailout

France is edging closer to potentially seeking a bailout from the International Monetary Fund (IMF) as its government faces mounting pressures, with Finance Minister Eric Lombard acknowledging that the risk of IMF intervention is "in front of us." The country’s economic instability has been worsened by a ballooning national debt and a rising budget deficit, expected to hit 5.4% of GDP this year, according to reports.

Lombard admitted that while the government hopes to avoid seeking IMF help, it’s a possibility they can’t rule out. "It is a risk that we would like to avoid, and one that we should avoid, but I cannot tell you that this risk does not exist," he said. France’s debt currently stands at a record €3.3 trillion (£2.85 trillion), surpassing the size of its entire economy, putting significant pressure on the government’s ability to maintain fiscal control.

On August 26, long-term borrowing costs for France reached their highest level since 2011, with the yield on 30-year French bonds rising to a 14-year high of 4.42%. The 10-year yield also rose to its highest level since March, further highlighting doubts about the country's economic future.

Although France has never sought an IMF bailout, the country now faces an unprecedented situation. Its national debt is expected to hit 116.3% of GDP this year, significantly higher than the UK’s projected 103.9%, according to a report by The Telegraph. This has raised fears that France’s fiscal issues could spiral out of control without intervention.

The political crisis further complicates the situation, with Prime Minister François Bayrou struggling to push through his proposed deep budget cuts. These measures, aimed at reducing the deficit by 1.5% of GDP next year, have faced stiff opposition. Bayrou is expected to lose a confidence vote scheduled for September 8, following the ousting of former Prime Minister Michel Barnier in December for failing to secure support for austerity measures, as per the The Telegraph report.

However, Lombard reassured investors on August 28, insisting that he did not foresee a financial crisis in France, despite the looming risk of a government defeat in an upcoming confidence vote.

"I don’t believe in a financial crisis," he said at a gathering of France's MEDEF business lobby. "The country is wealthy, growing, and well-managed. It is under control, and French businesses are performing their duties."

Lombard further emphasized that the government faces no challenges in financing the economy and reiterated that the public deficit is on track to be reduced to 5.4% of GDP by the end of the year, as planned.