Farewell to the Euro Debt Club

Morgan Stanley has advised its institutional clients to sell French government bonds.

Thomas Kolbe | July 9, 2026

Was Morgan Stanley the party pooper at Europe’s debt binge? The New York-based investment bank has advised its institutional clients to sell French government bonds. It appears that capital markets are increasingly turning away from the European Union -- precisely at the moment when Germany is preparing for a historic expansion of public debt.

Those who want to separate political propaganda from reality should avoid press conferences and instead look closely at the financial markets. Bond markets and stock exchanges reflect the expectations of millions of investors. The future, in a sense, receives a price tag. And it is worth paying close attention when one of the world’s major investment banks, such as Morgan Stanley, warns about European sovereign debt -- in this case, French government bonds.

Last Friday, the New York-based financial institution advised its institutional clients to reduce their holdings of French sovereign debt. The risk, according to Morgan Stanley, has become too large given the apparently increasingly unmanageable debt crisis of a country that has politically maneuvered itself into a dead end.

France’s debt burden could reach 200 percent of GDP by 2040, according to warnings from the OECD. Certainly, this lies far into the future. Yet the message has now entered the financial world: Emmanuel Macron is a president without a popular mandate -- and soon perhaps without market credibility as well.

Morgan Stanley’s warning about France’s debt mountain, which has now grown to roughly €3.5 trillion, is directed specifically at asset managers, pension funds, insurers, hedge funds, and other professional investors in the bond market. France’s public debt has risen to around 118 percent of GDP. Annual interest payments amount to roughly €66 billion this year. Morgan Stanley warns that........

© American Thinker