Sovereign Debt Trajectory Simulator

Simulate sovereign debt-to-GDP evolution, interest rate-growth differentials (r − g), primary balance targets, and fiscal stress shocks.

Economy Preset:

Macroeconomic Levers

Starting Debt-to-GDP (2024) 112.5%

Initial outstanding gross public debt as % of nominal GDP.

Baseline Primary Balance -3.4%

Government revenue minus non-interest expenditure (% of GDP). Deficit is negative.

Effective Borrowing Rate (r) 3.4%

Weighted sovereign debt refinancing interest rate.

Nominal GDP Growth (g) 2.6%

Real GDP growth plus GDP deflator (inflation).

Annual Fiscal Effort (ΔPB) +0.20%

Annual improvement in structural primary balance (% of GDP/yr).

Projection Horizon 10 Years

Stress Test Shocks

+150 bps Yield Surge Growth Slump (−1.2%) Fiscal Slippage (−1.0%) Bank/Bailout +3% GDP

2026 Peak / Projected Debt

118.8%

↑ Near record alert

End of Horizon Debt

122.4%

Δ +9.9% pts

Snowball Differential (r − g)

+0.80%

Adverse dynamic

Stabilizing Primary Balance

+0.88%

Required to freeze debt

Projected Debt-to-GDP Trajectory (2024–2034)

Modeled Path

Stress Trajectory

Maastricht 60%

Debt Trajectory Expanding (Snowball Driven) Effective interest rates exceed growth (r > g), requiring an immediate primary surplus improvement to halt debt expansion.

Fiscal Gap

4.28% of GDP

Year	Debt / GDP	Annual Δ Debt	Primary Bal.	Interest (r)	Growth (g)	Snowball Impact

Ready. Parameters synchronized.

The Sovereign Debt Accumulation Equation

The standard macroeconomic sovereign debt dynamics equation decomposes annual changes in debt-to-GDP into the endogenous snowball effect, primary balance, and stock-flow reconciliation:

Δd_t = [(r_t − g_t) / (1 + g_t)] · d_t−1 − pb_t + sf_t

When refinancing costs (r) surpass nominal GDP expansion (g), debt compounds automatically unless governments run a counteracting primary surplus (pb > 0).

Context Behind the 2026 France Alert

In post-2022 monetary tightening environments, legacy low-coupon bonds mature and are rolled over at 3.0–3.8% yields. With France's public debt surpassing 112% and primary deficits hovering around 3.0–4.0% of GDP, the mechanical compounding effect pushes debt toward 120% by 2026–2027.

Stabilizing at 120% requires either reducing the primary deficit to near +0.9% of GDP or achieving nominal growth that exceeds the average borrowing rate.