The current political uncertainty, which is plaguing France, the eurozone’s second largest economy, seems to be having serious effects on the markets.
The country’s borrowing cost has reached Greece’s levels for the first time in its history, in an indication of the increasing concern about the fate of the French government.
Although it is considered one of the safest investments in the eurozone, the yield on the French bond climbed on Thursday to 3.03%, the same as the yield on the Greek bond, which currently fluctuates at 2.99%.
Analysts are concerned that Prime Minister Michel Barnier’s attempt to “pass” the 2025 budget through Parliament will lead to the collapse of the government, given that Marine Le Pen’s far-right is threatening to submit a vote of no confidence if her demands are not met.
And while the finance minister’s stated willingness to find a consensual solution may somewhat de-escalate market concerns, the consistent underperformance of the French bond in recent months continues.
The next day
As for the next day, much will depend on the moves of Marine Le Pen, who has a sufficient number of MPs to “overthrow” the Barnier government, in collaboration with the MPs of the Left.
S&P is due to publish its regular report on the French economy next Friday.
Last month, Moody’s and Fitch downgraded the outlook to negative, threatening Paris with a possible review of the rating in the near future.
