It has joined the group of the most dangerous borrowers in the eurozone’s “region”, big investors say, as political turmoil undermines efforts to tackle the country’s growing debt.
It is recalled that in his efforts to reduce the budget deficit, overturning his government and aggravating a crisis that has already pushed the cost of borrowing Paris close to its highest level than the eurozone debt crisis.
At a rate of 3.49%, the yield on France’s 10 -year bond is consistently higher than that of Greece (3.37%), while it is approaching Italy (3.52%). As the Financial Times points out, who are returning to the issue, this comparison is made with two countries “which were long considered dangerous by world investors”.
“France is the new region,” explains the FT, Kevin Thozett, a member of the investment committee of the French Carmignac asset management company.
The risk premium
The additional interest rate paid in France’s 10 -year bonds against German reports – a measure of the additional borrowing costs required by investors to lend to Paris – increased more than 0.8 percentage points on Tuesday, as the nervousness of the country’s financial prospects.
This additional risk premium paid for French government bonds becomes “new regularity”, Thozet said. “Europe is moving at” different speeds … France is in the slow lane, Germany and southern Europe accelerate “.
To find a way to escape the parliamentary impasse in order to prevent the impending social upheaval and market concern. The Champs Elysee has stated that it will appoint a new prime minister in the coming days. However, choosing a new person will not be an easy task.
In… Calendars the budget
Bairo’s plans, including the non -popular idea of abolishing two days of national holiday, were aiming for the france to reduce France to 4.6% of GDP next year from 5.4% by the end of 2025. He will weaken in an attempt to persuade the opposition to abstain and let it pass.
The debt to GDP in France rose to 113% last year, according to Eurostat, from 101% in 2017, when Macron took over the presidency. It is expected to reach 118% by 2026. Moody’s evaluation house downgraded the country’s credit rating in December.
S&P Global and Fitch rating agencies have it in negative prospects, with Fitch to issue its latest evaluation on Friday. A degradation from the Fitch House would push France’s evaluation to A+, seven stages above the Junk level and the lowest between its counterparts.
Aman Bansal, Citi’s senior strategic interest rate analyst, is among analysts who believe that confidence vote increases the risk of degradation.
Uncertain future
The same composition of the French Parliament makes it very difficult for any consensus on a new budget and that the political impasse could continue until the presidential election of 2027.
“France will be a troubled kid for bond markets for the next 18 months,” says David Jean, head of European fixed income at Franklin Templeton, adding that he expects to see “continuing volatility” in the French counterparts.
Maya Bandari, head of multi -asset investment in Neuberger Berman for the EMEA area, said that “fiscal slip seems to be the message” in any possible political scenario. “It’s hard to see a positive result.”
During the eurozone public debt crisis that began a half decade ago, investors divided Member States into secure “basic” borrowers and the dangerous “region”, where bond yields were launched at a non -viable level, triggering the European bank.
“Semi … core”
France, which was traditionally at the main hard core of the eurozone, is considered here not so safe borrower, with Paris being characterized by investors as a “semi-prey”. This year there has been a dramatic debt increase in traditional “regional” borrowers.
This has also helped to shift investors’ perception of the relative risk of French debt, although the cost of borrowing in Paris remains much lower than the heights of the “region” countries during the debt crisis.
“What we are seeing today is a slow movement of France to the district category unless fiscal policy is adapted soon,” explains Tomatz Villadek, a macroeconomic strategy for Europe at T Rowe Price.
Mobilizations
Massive mobilizations and strikes across the country are scheduled for tomorrow, as citizens are complaining about the proposed spending cuts and Macron itself. And analysts believe that serious social upheavals could exert further upward pressure on bond yields.
The French shares are also left behind this year, and much of Epirus has enjoyed the rise of stock markets.
“The lack of clarity on the way forward and the deterioration of fiscal dynamics mean that the risk premium for French bonds and domestic shares is unlikely to decline significantly soon,” said Emmanuel Kau, head of European strategy.
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