France expects its debt servicing costs to rise 25 per cent this year to €65bn, finance minister Roland Lescure said on Friday. "Today we spend more on servicing the debt than on educating our kids or defending our nation," he said.

Lescure cut GDP growth forecasts to 0.5 per cent, half the government's original projection, blaming higher energy prices from the Iran war, drought damage to farming and political uncertainty ahead of April's presidential election. He warned the 5 per cent deficit target is now out of reach. Inflation is expected at 2.1 per cent.

The ECB raised rates a quarter point to 2.5 per cent on Thursday. France's 10-year yields rose as high as 4.45 per cent, the highest since 2008, with the spread over Germany widening beyond 0.9 percentage points.

Gross debt stood at €3.5tn, or 117.6 per cent of GDP, versus a Eurozone average of 88.9 per cent. Unemployment hit 8.3 per cent in the second quarter.