Germany warns Europe over French debt worries

German Economy Minister Katherina Reiche urged European countries on Thursday to keep public finances under control as concern grows over France's debt levels.

Asked about French public finances, Reiche said French Finance Minister Roland Lescure was trying to create a budget that was constitutional and geared towards the future. France last week unveiled a 2027 budget bill that includes spending cuts and tax increases aimed at reducing the budget deficit.

Reiche said public debt was an important measure of sound fiscal and financial policy. She noted that Germany still held top-tier debt ratings from major agencies and said it would be better if more European countries were close to that level.

She also said Germany's increased public spending on defence and infrastructure would push up its own debt and would need to be repaid. “There is no free lunch,” she said, adding that this also applied to public finances.

Concern has risen in Germany about public finances in France, the eurozone's second-largest economy. French government borrowing rates have recently reached levels not seen since the global financial crisis.

Marcel Fratzscher, president of the DIW economic institute, told the Rheinische Post newspaper that rising debt and political paralysis could weaken confidence in public institutions, creating what he called a “vicious circle”. He said the result could be a weaker economy and a growing risk of recession, which could push deficits and debt higher.