French bond selloff pressures euro zone's weaker economies

French government bond yields hit a 24-year high above 5% on Thursday, widening the premium over German Bunds to nearly 180 basis points, the most since the 2011 euro zone debt crisis, driven by a large fiscal deficit, political stalemate, and civil unrest. The selloff is spreading to other debt-laden euro zone economies, with Italian yields rising 14 basis points this week to 4.616% and Belgium's borrowing costs hitting their highest since early 2012. Belgium's default insurance costs also reached their highest since April 2020, though analysts note Belgium's situation is less severe than France's. Investors worry that high borrowing costs will force refinancing at elevated rates, and that French politicians may avoid necessary debt-reduction steps amid protests. Italy faces an election next year that could complicate debt plans, while social unrest over housing and living costs has spread across Belgium and northern Italy.