France’s borrowing costs have surged, with 10-year bond yields now above Greece and close to Italy, as political instability intensifies. Prime Minister François Bayrou resigned after failing to pass his deficit-cutting budget, leaving President Macron to find a successor capable of navigating a hung parliament. Investors are warning that France is slowly shifting into the Eurozone’s “periphery,” a category of riskier borrowers once reserved for countries like Greece and Italy.
With France’s debt-to-GDP ratio expected to reach 118% by 2026 and social unrest looming, market volatility is likely to continue. Bond managers expect a prolonged period of uncertainty, and any fiscal consolidation is unlikely until after the 2027 presidential elections. Read more on Financial Times.