European government bond yields at 15-19 year highs. Now compare the debt with 2007-2011

European government bond yields at 15-19 year highs. Now compare the debt with 2007-2011​

On Thursday, September 10, the ECB raised its deposit rate by 25 basis points to 2.65% - its second hike since the US-Iran war began - and government bond yields refreshed multi-year highs. According to Trading Economics, Germany's 10-year Bund yield climbed above 3.45%, the highest since April 2011; French OATs traded near 4.44%, an 18-year high last seen in November 2008; Spanish bonos reached 3.99%, above the November 2023 peak; and UK gilts jumped to 5.4%, their highest since August 2007.

ECB President Christine Lagarde called the move a "no-brainer" and warned that inflation's return to the 2% target could slip beyond end-2027.

Fig. 1. 10-year yields on September 11, 2026 versus levels a year earlier. Source: Trading Economics, Investing.com.

Friday's pause changes little: the week was still heading for the worst run for global bond markets since the Iran war began, with Brent near $105 and European gas at a three-and-a-half-year high.

Eurozone inflation accelerated to 3.3% in August, the highest since September 2023, and to 4.3% in Spain. Markets now price roughly three more ECB hikes by March 2027 and another by June; in the UK a November BoE hike is fully priced, plus three more by mid-2027.

The yields themselves are not the news - the base they sit on is. The last time these levels printed, in 2007-2011, debt ratios looked very different.

Fig. 2. Debt to GDP then and now. Data: Eurostat; for the UK, net debt per ONS/OBR.

• France: OATs at 4.3-4.4% were last seen in November 2008, when debt was 69.8% of GDP (Eurostat). Now it is a record 115.6% (2025, INSEE), with estimates near 118.5% by end-2026. In absolute terms the debt is EUR 3.54 trillion as of Q1 2026;
• United Kingdom: gilts above 5.3% were last seen in August 2007, when net national debt was about 35.5% of GDP. Now it is 94.3% (December 2025, OBR), the highest since the early 1960s per ONS;
• Germany: the only one carrying less debt now than at these yields - 63.5% versus 78.5% in 2011. But the trend has turned: 65.9% forecast for 2026 and about 70% by 2028 as special funds and rearmament borrow against a higher curve;
• Spain: 105.2% in 2023 versus 100.7% now - the only one genuinely deleveraging, yet its yield now exceeds the 2023 crisis peak and its inflation is the eurozone's hottest.

The arithmetic is stark: rates last seen before the previous debt storm now press on debt half again as large in France and nearly three times as large in the UK. If all of France's debt were refinanced at today's 4.4%, interest would cost roughly 5% of GDP, about double the actual 2.2%. That is an instant-repricing calculation, not a forecast: legacy coupons sit well below market and maturities stretch over years.

Fig. 3. General government debt to GDP, 2007-2025. Source: Eurostat.

ℹ INFO The cheap legacy of the QE era still shields budgets, but the turn is visible in official statistics: Eurostat shows France's interest bill rising from 1.3% of GDP in 2020 to 2.2% in 2025, Germany's from 0.6% to 1.1%. And that is still before the refinancing wave.

Fig. 4. Interest on government debt, % of GDP. Source: Eurostat.

Markets do differentiate: the same Thursday, Reuters reported a Portuguese debt upgrade, from pariahs to pin-ups. But France, with EUR 3.5 trillion of debt, is not Portugal. If the ECB and the BoE deliver the hikes traders price, "Thursday, September 10" may prove one of the calmer days.

⚠ IMPORTANT Verdict: the problem is not the yield level but the base it presses on. A 4.4% rate on debt of 70% of GDP and a 4.4% rate on debt of 115% of GDP are different countries in terms of fiscal durability. The long maturity profile of the old debt delays the budget blow, it does not cancel it: every day of elevated rates makes Europe's debt more expensive.