France is in crisis but bond markets leave other governments at risk of meltdown too
Sébastien Lecornu’s abrupt resignation as the French prime minister on Monday after less than a month in the role marked the latest clash between France’s stretched public finances and its polarised politics,Lecornu was the latest prime minister to try and fail to cobble together a package of spending cuts and tax rises that would pass muster in a parliament without a clear majority, and contain mounting bond market pressures,Emmanuel Macron is left with the choice of appointing yet another premier to try their luck with the political maths – or resigning himself,Not surprisingly, markets were rattled by the news on Monday,France’s travails are particularly acute, but the president is far from alone in 2025 in trying to grapple with a mismatch between overstretched public finances and a weary electorate with little appetite for budget cuts.
Government bond yields, essentially the interest rate on a country’s debt, have been creeping up in many major economies in recent weeks and months, amid concerns about tax and spending pressures,Yields on longer-term Japanese debt jumped on Monday, with the likely new prime minister, Sanae Takaichi, expected to ramp up spending – despite Tokyo’s 250% of gross domestic product (GDP) debt pile – amid consumer frustration over rising prices,In the UK the putative Labour leadership contender Andy Burnham was ridiculed by colleagues last week for suggesting the government should be less “in hock” to the bond markets, when the Treasury is paying £110bn a year in interest to investors, and yields have repeatedly shifted in response to policy moves – as well as global pressures,Rachel Reeves has repeatedly insisted her fiscal rules, which frustrate some Labour colleagues, are just the consequence of the need to maintain the confidence of the bond markets,In contrast with the French situation, the UK has a stable government with the levers to resolve its fiscal problems – by raising taxes, in the first instance.
However, the recent example of Liz Truss, who lasted barely longer than Lecornu in power, is a constant reminder of the risks of throwing caution to the wind,In the US, meanwhile, the market for treasuries – US government bonds – has been more quiescent despite Donald Trump’s massive tax cuts, forecast to add up to $2tn (£1,5tn) to public debt,Ten-year yields climbed to 4,6% in May as anxiety over the president’s tariff plans peaked, but for the moment those concerns have been more than outweighed by the promise of more Federal Reserve rate cuts and the hype around the AI investment boom.
However, analysts believe the budget pressures in the US are likely to become more acute in the months and years ahead, with the White House offering no plan to tackle the deficit, which was 6% of GDP last year even before the tax cuts.“It looks to me like an accident waiting to happen,” said Russell Jones of the consultancy Independent Economics.“It’s not a sustainable situation.”Each country’s domestic political challenges are different but there is a broader picture here.Many governments ran up significant debts during the global financial crisis, and again through the Covid pandemic.
These remained manageable during the extended period of low interest rates that followed the crash,But post-pandemic, central banks began raising rates to battle the rise in inflation as global industry reopened after the Covid shutdown, and then the fresh increase in prices that followed Russia’s invasion of Ukraine,Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionThat has left governments wrestling with higher borrowing costs, while many economies – and voters – are still arguably bearing the long-term scars of the financial crisis,That means politicians struggle to get buy-in for cuts,“There’s a sense from the public that we’ve endured some tough times already,” said Neil Shearing, the group chief economist at the consultancy Capital Economics.
In its global debt report, published earlier this year, the Paris-based Organisation for Economic Co-operation and Development said interest costs as a share of GDP among member countries had jumped from the lowest level in 20 years to the highest, between 2021 and 2024.“Governments and companies borrowed $25tn globally from markets in 2024, nearly triple the amount in 2007,” the OECD’s economists said.“This increase is largely the legacy of the 2008 global financial crisis and the Covid-19 pandemic, in response to which large fiscal support packages, mainly funded via debt markets, helped avoid deeper recessions.”At the same time, many governments face upward pressures on long-term spending, including ageing societies, the transition to net zero – and in the case of European nations, the need to ramp up defence as the US leans away from Nato.All of these sovereign borrowers are fishing in the same pool of international investors, and concerns about sustainability in one major economy can spill over into others – as seen when UK yields tracked US borrowing costs upwards earlier in the year, for example, intensifying the pressure on Reeves, who responded with plans for spending cuts.
France’s crisis is likely to continue to be the focus for the moment, as Macron weighs up his next steps.But the global borrowing glut has left many governments vulnerable to even minor shifts in yields – and every bout of market jitters exacts a heavy political price.
Jaguar Land Rover aims to restart limited production after cyber-attack
Some factory workers at Jaguar Land Rover (JLR) returned to work on Monday, with the British manufacturer hoping to start making a limited number of cars as soon as this week after a crippling cyber-attack.The first factory expected to restart production is at Wolverhampton in the West Midlands, where JLR makes engines. Some workers are understood to have returned to the site on Monday.Suppliers have also been told JLR may look to restart limited production at its factories in Nitra, Slovakia, and Solihull in the West Midlands by the end of this week, according to two people with knowledge of the situation. Nitra makes JLR’s Land Rover Defender, while Solihull – JLR’s biggest site – produces the Range Rover, its flagship luxury model
As London stock market listings show signs of life, Reeves must add momentum | Nils Pratley
After the drought, here comes the rain. Well, more of a light drizzle actually, but three flotations or float announcements in the space of a few days will be a relief for the parched London Stock Exchange.The biggest is Shawbrook, a bank focused on buy-to-let mortgages and lending to small businesses. It was taken off the market in 2017 by a pair of private equity firms, BC Partners and Pollen Street, and should now return by the end of the year with a likely £2bn-ish valuation.The timing is superficially odd because the talk is of higher taxes on banks in Rachel Reeves’s budget next month, but makes sense in other ways
France is in crisis but bond markets leave other governments at risk of meltdown too
Sébastien Lecornu’s abrupt resignation as the French prime minister on Monday after less than a month in the role marked the latest clash between France’s stretched public finances and its polarised politics.Lecornu was the latest prime minister to try and fail to cobble together a package of spending cuts and tax rises that would pass muster in a parliament without a clear majority, and contain mounting bond market pressures.Emmanuel Macron is left with the choice of appointing yet another premier to try their luck with the political maths – or resigning himself. Not surprisingly, markets were rattled by the news on Monday.France’s travails are particularly acute, but the president is far from alone in 2025 in trying to grapple with a mismatch between overstretched public finances and a weary electorate with little appetite for budget cuts
Tax authorities examine finances of key Nigel Farage ally
The finances of one of Nigel Farage’s key confidants are being examined by the UK’s tax and revenue authorities amid questions over his income from wealth and business activities, the Guardian understands.The scoping exercise by HMRC is said to be focused on tax residency and the business affairs of George Cottrell, whom Reform UK’s leader Farage has described as “like a son to me”.Known as “Posh George”, Cottrell, 31, leads an expensive lifestyle, frequently travelling around the world and regularly using a £4m house in one of the wealthiest areas of west London.Cottrell has emerged as a senior figure within Reform’s leadership and supporter network at a time when the party is surging ahead in the polls.A recent BMG poll for the i newspaper put the party on 35% – 15 points ahead of Labour
Politics drives markets: euro and Paris stock market slide amid French political crisis; Japanese stocks surge after Takaichi’s victory– business live
Newsflash: France’s stock market has suddenly lurched lower, as political turmoil in Paris ratchets up a notch.The CAC 40 share index has tumbled by 1.8%, following reports that France’s new prime minister, Sebastien Lecornu, has reportedly resigned!That’s a remarkable development, as Lecornu took office less than a month ago, and unveiled key members of his new government only yesterday.These news alerts, from Reuters, came just before the market tumble:06 Oct 2025 08:42:42 - NEW FRENCH PM LECORNU HAS PRESENTED HIS RESIGNATION TO MACRON - BFM TV CITING ELYSEE06 Oct 2025 08:43:12 - ELYSEE: MACRON HAS ACCEPTED RESIGNATION OF PM LECORNUTime to wrap up….Political drama in Paris and Tokyo have gripped investors today, with mounting anxiety over politicians’ ability to address rising government debt levels
UK regulators step up crackdown on firms chasing cut of car finance payouts
UK regulators have shut down some claims companies and ordered others to stop taking on clients as they step up a crackdown on firms making misleading statements about car finance compensation.Four regulators have joined forces to tackle a wave of bad practices among claims management companies (CMCs) and consumer law firms that are attempting to grab a slice of the billions of pounds in compensation set to be paid to victims of the car finance commission scandal.On Tuesday the Financial Conduct Authority is due to announce more details of a planned official compensation scheme for people who have lost out, which should mean payouts begin next year.Millions of people are in line for compensation after a supreme court ruling in August. This largely overturned an earlier ruling that could have led to compensation payouts of up to £44bn but will still result in a redress scheme covering some car loans dating back to 2007 that could mean up to £18bn is paid out
Apple Watch Series 11 review: wrist-flickingly good with longer battery life
OpenAI promises more ‘granular control’ to copyright owners after Sora 2 generates videos of popular characters
Six out of 10 UK secondary schools hit by cyber-attack or breach in past year
Elon Musk, the Anti-Defamation League and the right: what’s behind the latest blow-up?
Tesla hit with second lawsuit over deadly California Cybertruck crash
TikTok ‘directs child accounts to pornographic content within a few clicks’