Hundreds of thousands of people have taken to the streets across Europe in recent weeks, angry at rising living costs, low wages, unaffordable housing and underfunded schools. Protests in France, Belgium, Italy and Portugal have sometimes descended into clashes, looting and fires, although many protests have remained peaceful. France has been at the centre of the unrest.
More than 550,000 people demonstrated nationwide on Saturday, according to the Interior Ministry, amid weeks of student protests over education and living costs. The unrest has turned the spotlight on a fiscal squeeze that governments are struggling to control. Years of heavy borrowing have left many European countries deeply in debt, and that debt is getting more expensive.
France’s borrowing costs are the highest since 2002, and the more governments spend on interest, the less they have for the schools, hospitals and pensions that protesters want. In this visual explainer, Al Jazeera looks at how governments borrow, where France ranks among the most indebted countries, and the trillions that governments spend on interest. Governments borrow money much like people do, but instead of going to a bank, they sell bonds.
In return, the government pays the buyers interest and promises to repay the full amount on a set date. A 10-year bond is a loan the government pays back after a decade. Its yield – the return investors earn for lending – is the most closely watched measure of how much markets trust a country to manage its debt.
When bond prices fall, yields rise, making borrowing more expensive. Like a family facing a higher mortgage rate, a government then spends more on interest and has less money for essentials, such as schools, hospitals and roads. Ten-year borrowing costs for major European economies have not been as high as 5 percent since the early 2000s, shortly after the euro was launched.
During the eurozone debt crisis of 2010 to 2012, only struggling countries such as Greece, Italy and Spain paid that much or more, and yields above 7 percent pushed Ireland and Portugal into bailouts. France now pays around 5 percent to borrow for 10 years, compared with 3.41 percent for Germany. The widening gap shows investors want a higher return for lending to France.
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