Is this how the great international borrowing spree ends? | Planet Money

Rich countries have been borrowing on a scale that would have looked reckless a generation ago, and France has become the clearest warning sign. The episode compares sovereign debt to a household living on credit cards, then shows how the U.S., the U.K., Italy, Canada, and France all moved far past the old 60% of GDP rule of thumb as interest rates stayed near zero after the financial crisis. Economists like Thomas Filipon say the era of cheap borrowing let governments treat debt rollover as normal, but rising rates now make that strategy far more dangerous.

France stands out because investors are no longer giving it the benefit of the doubt. The country faces large deficits, aging demographics, higher health costs, and a politically toxic fight over spending cuts, while bond yields jumped to around 5% and the spread versus Germany widened. The episode argues that debt levels alone do not trigger crises; credibility does. Investors care about whether a government looks capable of stabilizing debt over time, and France’s fractured politics is making that harder to believe.

The broader warning is that once a country enters a “danger zone,” higher rates can create a doom loop: worse finances lead to higher borrowing costs, which worsen finances again. The hosts say the U.S. still has more debt and bigger deficits than France, but it retains more credibility for now, which may be the most valuable asset in public finance.