Data updated as of October 1, 2025. Paris’ triple-digit budget deficit and losses at the Banque de France have put European monetary policy back in the spotlight.
There are signs of strain in overseas demand for French securities, raising the risk of fiscal decoupling in the eurozone, while mounting pressure on national budgets has sparked debate over the ECB’s use of non-traditional tools, which could also affect scarce assets like Bitcoin.
According to data collected by our research team and official reports from the Banque de France and the IMF, the observed tensions in French government bonds are consistent with an increase in risk premium demand in the secondary market.
Industry analysts also noted in the IMF Global Financial Stability Report that pressure on yields could quickly amplify in a scenario where renewals by foreign investors are weak.
Summary: Important numbers to follow
- Losses of Banque de France (BdF): approximately €7.7 billion in fiscal year 2024, recently reported (Banque de France).
- France’s budget deficit in 2024: more than 168 billion euros, equivalent to 5.8% of GDP (Eurostat).
- Public debt: around 60% of securities are held by foreign investors, a signal that highlights the risk of volatility in the presence of renewal flows and market fluctuations (Latest news from Telegram: Balance sheet reveals $400 million in cryptocurrencies).
Banque de France: Losses and European background
BdF ended 2024 with a recently reported net loss of approximately 7.7 billion euros. The figure is in line with the difficulties faced by other European central banks, where the rate hike cycle has seen interest costs on reserves and refinancing operations rise compared to the yield on securities purchased during periods of low interest rates.
These are mainly accounting losses, which do not hamper the central bank’s ability to operate, but they complicate remittances to the country and fuel debate about normalizing monetary policy.
Why is the budget deficit important for the ECB?
A deficit equivalent to 5.8% of GDP exposes the French government to having to rely on an ever-increasing supply of government debt, which requires stable demand to avoid yield tensions.
A potential slowdown in external demand could lead to wider spreads and create an environment of financial fragmentation in the euro area, as highlighted by the comparison between French government bonds (OAT) and German government bonds.
In this context, the European Central Bank (ECB) is watching closely. Although the ECB’s mandate is price stability, set at 2%, it has tools to deal with moments of market stress (such as PEPP reinvestment and the Transmission Line Protection System (TPI) introduced in 2022) and operates under tough conditions.
Possible scenarios (conditional on data)
- Targeted PEPP reinvestment to stabilize the market in the event of a shock.
- We use TPI when fragmentation threatens the proper functioning of monetary policy transmission.
- A potential new wave of QE (quantitative easing) could materialize only if the data on inflation and growth warrant it.
- Ensure banks have liquidity to avoid undesirable monetary tightening.
The most extreme hypotheticals, such as capital controls, redenominations, and debt defaults, remain theoretical scenarios and are currently not on the institutional agenda.
Market perspective: The story of liquidity and cryptocurrencies
Arthur Hayes, co-founder of BitMEX, argued that the deterioration in France’s public accounts could force the ECB to create large-scale liquidity, with potentially favorable implications for assets that are not subject to discretionary decisions, such as Bitcoin.
This interpretation, reported by BitMEX’s Arthur Hayes, who introduced crypto degeneration to Maelstrom Fund investors at TOKEN2049, reflects a prevailing narrative among some macro crypto investors: increased liquidity could lead to increased appetite for global and rare assets.
At the same time, many economists have urged caution, stressing that the ECB is bound by rules such as a ban on financial lending and the “capital key” principle, in addition to a fixed inflation target.
However, the potential for relaxation of that approach will necessarily be based on technical criteria and economic data rather than individual country needs.
Potential Impact on Bitcoin and Cryptocurrencies: What History Can Tell Us
During the last major quantitative easing cycle (in March 2020, when the Federal Reserve announced a roughly $4 trillion (Federal Reserve) securities purchase program), Bitcoin rose from about $6,000 to $69,000 between March 2020 and November 2021, an increase of about +1,050%.
This historically unique episode serves to strengthen the idea that large-scale liquidity injections can have positive outcomes for cryptocurrencies, albeit in the very different context of a health crisis and specific fiscal policies.
Given the complex interplay of multiple factors, it remains clear that the correlation between global liquidity and crypto performance does not imply a direct and mechanical causal relationship.
If you need further insight, you may find it useful to refer to the ECB’s quantitative easing guide and analysis of the dynamics of the Bitcoin halving.
Flows from abroad, stock vs. flows, market risk
When analyzing France’s debt situation, it is important to distinguish between flows and stocks. Most of the debt is held by foreign investors, but the biggest impact on yields is the willingness of these investors to renew or increase their purchases based on new price conditions.
In other words, if large foreign holders reduce their exposure, Paris will have to offer higher premiums or rely on stronger domestic demand.
In stressful situations, the ECB may adjust reinvestments to prevent local shocks from turning into systemic crises, while some speculative funds may move into alternative assets, including cryptocurrencies.
Impact on ECB monetary policy
In the short term, the strategy will continue to focus on controlling inflation and seek to avoid financial instability. The ECB has a range of tools in place, including targeted communications, reinvestment flexibility and specific funding lines, before it is forced to resort to new quantitative easing.
Only a combination of slower growth, lower inflation towards the 2% target, and continued stress in bond markets could lead to a correction in the current monetary policy path.
Even in such a hypothetical scenario, each intervention would be calibrated based on economic and financial data to maximize the risks associated with excessive liquidity expansion.
conclusion
The scenario depicted by the huge French deficit and the losses of the Banque de France highlights the market’s sensitivity to the ECB’s decisions, as the risk of financial fragmentation becomes real.
While some interpret these signals as a prompt to speculate on the arrival of further monetary policy intervention (which could tip the scales in favor of Bitcoin and other cryptocurrencies), vigilance remains essential and volatility remains an induced risk.
For investors, the message is twofold. One is to closely monitor flows and liquidity signals from the ECB without assuming a repeat of the 2020 scenario, and the other is to consider the crypto-promotion narrative as one of many dynamics at play in the current complex economic landscape.
