Data updated as of October 1, 2025. The three-digit deficit of Paris’s budget and the loss of the Banque de France bring the spotlight back on European monetary policy.
The foreign demand for French securities shows signs of strain, increasing the risks of financial fragmentation in the eurozone, while the growing pressure on the state budget sparks discussions on the use by the ECB of unconventional tools that could also impact scarce assets like Bitcoin.
According to the data collected by our research team and the official reports from the Banque de France and the IMF, the tensions observed on French government bonds are consistent with an increase in the demand for risk premiums in the secondary markets.
Industry analysts also note that, in scenarios of weak renewal by foreign investors, the pressure on yields can amplify very quickly IMF Global Financial Stability Report.
In brief: the key numbers to follow
- Loss Banque de France (BdF): approximately €7.7 billion in the 2024 fiscal year, recently reported (Banque de France).
- French budget deficit 2024: over €168 billion, equivalent to 5.8% of GDP (Eurostat).
- Public debt: about 60% of the securities are held by foreign investors, a signal that highlights the risk of volatility in the presence of renewal flows and market variations (Latest news from Telegram: the balance sheet reveals $400 million in crypto).
Banque de France: loss and European context
The BdF closed 2024 with a net loss of approximately €7.7 billion, recently reported: a figure in line with the difficulties of other European central banks which, following the cycle of rate hikes, have seen the cost of interest on reserves and refinancing operations increase compared to the yields of securities purchased during periods of low rates.
These are mostly accounting losses, which do not hinder the operational capacity of the central bank, but complicate transfers to the State and fuel the debate on the normalization of monetary policy.
Why the deficit matters for the ECB
A deficit equal to 5.8% of GDP exposes the French government to having to rely on an ever-increasing supply of government bonds, which requires stable demand to avoid tensions on yields.
A potential slowdown in foreign demand could lead to the widening of spreads, as highlighted in the comparison between French bonds (OAT) and German Bunds, creating a climate of financial fragmentation in the eurozone.
In this context, the European Central Bank (ECB) is observing closely. Although the ECB’s mandate is price stability, set at 2%, it has tools – such as the reinvestments of the PEPP and the Transmission Protection Instrument (TPI), introduced in 2022 – to address moments of stress in the markets, acting under stringent conditions.
Possible Scenarios (conditioned by the data)
- Targeted PEPP reinvestments to stabilize markets in case of shocks.
- Use of the TPI if fragmentation threatens the proper functioning of monetary policy transmission.
- A potential new wave of QE (quantitative easing) could take shape only if data on inflation and growth justify it.
- Liquidity lines to banks to avoid an undesirable financial tightening.
The most extreme hypotheses – such as capital controls, redenominations, or defaults – remain theoretical scenarios, without currently appearing on the institutional agenda.
The Market Perspective: Liquidity and Crypto Narrative
Arthur Hayes, co-founder of BitMEX, argued that the deterioration of French public accounts could force the ECB to create liquidity on a large scale, with potentially favorable implications for assets not subject to discretionary decisions, like Bitcoin.
This interpretation, reported by Arthur Hayes of BitMEX introduces his Maelstrom fund investors to degen crypto at TOKEN2049, reflects a narrative widespread among some macro-crypto investors: increased liquidity can translate into a rise in appetite for global and scarce assets.
At the same time, many economists urge caution, emphasizing that the ECB is bound by rules such as the prohibition of monetary financing and the principle of the “capital key,” in addition to its fixed inflation target.
That said, any potential easing of its approach would inevitably be based on technical criteria and economic data, rather than the needs of individual states.
Potential Effects on Bitcoin and Crypto: What History Tells Us
In the previous major quantitative easing cycle – the one announced by the Federal Reserve in March 2020 with a securities purchase program of about $4 trillion (Federal Reserve) – Bitcoin went from about $6,000 to $69,000 between March 2020 and November 2021, recording an increase of approximately +1,050%.
This historically unique episode, albeit in a very different context characterized by the health crisis and specific fiscal policies, helps to reinforce the idea that a massive injection of liquidity can have positive outcomes for cryptocurrencies.
It remains evident that the correlation between global liquidity and the performance of crypto does not imply a direct and mechanical causality, given the complexity of the multiple factors at play.
For further insight, it is useful to consult the guide to the ECB’s quantitative easing and the analysis on the dynamics of Bitcoin halving.
Foreign flows, stock vs flows, and market risks
In the analysis of the French debt situation, it is important to distinguish between flows and stocks: although a high portion of the debt is held by foreign investors, what most affects yields is the willingness of these investors to renew or increase purchases based on the new price conditions.
In other words, if the large foreign holders reduce their exposure, Paris will have to offer higher premiums or rely on a stronger domestic demand.
In a context of stress, the ECB could adjust reinvestments to prevent local shocks from turning into systemic crises, while part of the speculative capital might migrate towards alternative assets, including cryptocurrencies.
Implications for ECB Monetary Policy
In the short term, the strategy remains focused on disinflation, aiming to avoid financial instability. The ECB has a mix of tools – targeted communication, flexibility in reinvestments, and specific funding lines – before having to resort to a new QE.
Only a combination of weak growth, declining inflation towards the 2% target, and persistent tensions in the debt markets could lead to a revision of the current monetary policy path.
Even in such a hypothetical scenario, each intervention would be calibrated based on economic and financial data, to best contain the risks associated with excessive liquidity expansion.
Conclusion
The scenario outlined by a large French deficit and the loss of the Banque de France accentuates the markets’ sensitivity to ECB decisions, in a context where the risk of financial fragmentation is real.
While some interpret these signals as an invitation to speculate on the arrival of further monetary policy interventions – which could translate into favorable conditions for Bitcoin and other crypto – caution remains essential and volatility remains the guiding risk.
For investors, the message is twofold: closely monitor the flows and liquidity signals from the ECB, without assuming a repeat of the 2020 script, and consider the pro-crypto narrative as one of the many dynamics at play in the current complex economic landscape.
