The IMF Tries to Cover for France

The International Monetary Fund is attempting to play down France’s deteriorating situation amid rising government debt. 

Thomas Kolbe | July 24, 2026

So what is it: an all-clear signal or a reason for extreme caution? The International Monetary Fund is attempting to play down France’s deteriorating situation amid rising government debt. The IMF’s prescription: growth and fiscal consolidation should heal the patient. How exactly this is supposed to work, however, remains unclear.

Five years ago, a four-decade-long bull market in government bonds came to an end. Since then, investors, major institutional asset managers, and private investors have been slowly but steadily reducing their exposure to government debt issued by heavily indebted nations. France has now been drawn into this sell-off, with government debt at 115 percent of GDP and a budget deficit of 5.7 percent, making it one of the eurozone’s major fiscal problem cases.

A debt restructuring, however, remains politically unthinkable. Our monetary system is an uncovered credit-money system. If credit is eliminated from balance sheets on a large scale, bank balance sheets shrink, and creditors come under pressure. The entire process of credit creation and economic financing freezes.

Then everything collapses like a house of cards. The state apparatus built on cheap credit reveals itself for what it always was: an illusion. It would be an economic nightmare, because it would also expose the supposed omnipotence of central banks as an illusion and reveal that their rescue operations ultimately lead nowhere.

The trend is alarming: France’s long-term interest rates were already trading at around 4.7 percent on Tuesday.

4.7........

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