FROGS, not PIIGS, could spark the next global financial crisis

October 6, 2026 — 12:12pm

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Bond investors have been searching for weak points in a debt-laden global economy. The US, Japan and UK are firmly on their list. But it’s France, which has now become the flashpoint for a European and, perhaps, global crisis.

France is grappling with a major debt crisis, with the yields on its bonds soaring. The spread between the yields on France’s bonds relative to Germany’s, which are regarded as the eurozone’s safe haven, have blown out to levels not seen since the region’s debt crisis a decade and a half ago.

So precarious has France’s perceived position become that investors have coined a new term - “FROGS”, short for French Oversized Government and Social Security – to describe the crisis.

For much of this century, the focus on eurozone debt was on the countries on its periphery, the so-called “PIIGS” - Portugal, Italy, Ireland, Greece and Spain. But now even Italy and Greece’s bonds, long seen as the point of most vulnerability in the region, trade at lower yields than France’s.

The yield on France’s 10-year government debt touched 4.96 per cent last week, before edging back to 4.85 per cent. While lower than the equivalent US bond yield of 5.31 per cent, it compares with German bund yields of 3.49 per cent, Italy’s 4.65 per cent and Greece’s 4.49 per cent.

The spread between French and German 10-year yields has widened from 71 basis points at the start of the year to 136 basis points.

France’s prime minister warned last week that ‘reality is catching up with us.’

Some of the factors impacting the French debt are similar to those that have driven yields up in the US, Japan, the UK and elsewhere, including Australia, where the yield on 10-year bonds is 5.4 per cent, having started this year at 4.8 per cent.

There’s too much global government debt, with swelling budget deficits adding to........

© The Sydney Morning Herald