France’s 10-year borrowing rate climbed above 5 percent this week, an awkward backdrop to Marine Le Pen’s promise of earlier retirement. The far-right presidential frontrunner for France’s 2027 election is offering voters relief from the unpopular medicine of pension reform. But she is also promising creditors €140 billion ($157 billion) in net savings by 2032.
Both audiences will expect delivery. Her predicament reaches beyond France. Populists are promising more generous benefits, lower taxes or both just as borrowing becomes more expensive.
Governments that postponed unpopular choices with cheap debt face a less accommodating market. For parties campaigning against painful reforms, office may require an uncomfortable change of message to something less popular than advertised. The International Monetary Fund (IMF) says the G7’s average 10-year government bond yield rose by more than a percentage point between February and September to its highest level in almost two decades.
High debt, inflation and spending demands make lenders more exacting. The pressure comes from more than borrowing alone. Aging populations add to pension bills, while demands for defense and energy security compete for the same revenues.
Higher taxes or lower benefits would distribute the cost among different groups of voters. Investment in much-needed new infrastructure adds another line to the bill. Tired old grids and networks, built decades or even centuries ago, are no longer fit for the modern world.
Deficits will survive in general, because a growing economy can borrow without continually increasing debt relative to its income. But economies must be growing for that to happen, and there is persistent weakness across the G7. The expansion of entitlement obligations also requires far stronger growth to remain sustainable without the imposition of fiscal restraints.
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