French political chaos leaves borrowing costs on par with Greece | Wilnesh News

France’s brewing political crisis is spreading to financial markets, with the country’s borrowing costs reaching the same level as debt-ridden Greece for the first time on record on Thursday.

The spread between France’s 10-year government bond yields and Greece’s 10-year government bond yields – the yield difference between the two bonds – had fallen to zero earlier on Thursday. The French 10-year bond yield is 3.0010%, while the Greek 10-year bond yield is 3.030%.

Investors demand the same interest on French debt as they do on Greek debt, a peripheral country and debt-ridden economy.

Currently, the left-wing New Popular Front coalition says it will file a vote of no confidence in the government if Barnier attempts to force through the budget, which envisages tax increases and spending cuts worth 60 billion euros ($63.3 billion).

National rallies on the far right threaten to back the left in a no-confidence vote, a move that would bring down the government and plunge France into further political and economic uncertainty.

New elections won’t be held until next June, twelve months after the last parliamentary election, in which both the far left and the far right performed well in the first and second rounds of voting but failed to win a majority. Therefore, after the election, President Macron put the conservative Barnier in charge of a minority government after the election.

French officials sought to defend the economy on Thursday but acknowledged that bond investors view French debt as risky as Greek debt, a worrying development. However, Economy Minister Antoine Armand said on Thursday that the French economy was not comparable to that of Greece.

“France is not Greece. France’s economy, employment situation, economic activity and attractiveness, as well as economic and demographic strength are far superior to Greece, which means we are different from Greece.” Armand told French broadcaster BFM TVin the comments on Google Translate. He also praised Greece and other peripheral European economies for “sitting aside” and saving.

Jason da Silva, director of global investment strategy at Arbuthnot, said political unrest in France was bound to have “a knock-on effect on European investment” but said it could prompt French lawmakers to take action.

“Hopefully this will inspire more motivation among European political leaders to think about what will lead to future growth… Sometimes you need to take some pain from the market to really get political leaders to understand what economic growth requires, especially in ( potential trade) tariffs take effect,” he told CNBC’s Street Signs on Thursday.

Commenting on the parity of French and Greek government bond yields in an analysis on Thursday, Rabobank said that Barnier may even Step down.

The bank also pointed out that at the height of the Greek debt crisis in 2012, the spread between Greek and French 10-year government bond yields climbed to more than 30 basis points, but has gradually narrowed since 2016.

Although the French economy is nowhere near the level of crisis experienced by Greece following the 2007-2008 global financial crisis, the French economy is considered to require urgent attention; this is the budget deficit It is expected to reach 6.1% in 2024 By 2023, public debt will reach 110% of GDP.

After the global economic collapse of the late 1990s, Greece experienced the euro zone’s worst sovereign debt crisis, forcing the country to accept an international bailout and impose painful austerity measures and reforms. The country has since been praised for making progress in getting the economy back on track and reducing debt.

Greece expects economic growth of 2.1% in 2024 According to the European CommissionThe report noted in November that Greece’s “public debt-to-GDP ratio has been declining in recent years and is expected to reach 153.1% of GDP in 2024 before falling further to 146.8% of GDP in 2025 and 142.7% of GDP in 2026.”

The decline was driven by underlying surplus, nominal growth and a reduction in cash buffers in 2024, the report said.