French borrowing costs reach their highest level since 2002

France’s borrowing costs have risen as investors sell government bonds and worry about political risks.

The yield on its 10-year government bond touched 4.99%, its highest level since 2002, though it has not passed 5%.

The gap between French and German 10-year borrowing costs has widened to about 150 basis points.

Analysts say weak revenue growth, energy inflation, high interest rates and limited budget room leave France with little protection against further shocks.

Pressure on government debt could also affect French banks, which hold some of that debt, although their exposure is described as contained.

Bank of France Governor Emmanuel Moulin said the government can respond by approving a budget and committing to keep the deficit below 5%, and said France should not look to the European Central Bank for a solution.