Bond Markets Spooked by French Election

 

France’s deteriorating finances are at risk if voters choose populists who pledge even more government spending

The good news is that France isn’t in the same state as the financially stressed eurozone countries in 2010. 

They faced much bigger problems, which led to bond yields so high they created a doom loop between banks and government debt. 

Disaster, bailouts, bank failures and, in Greece’s case, default followed.

The bad news is that France’s situation is getting worse. It was downgraded by S&P Global last month because of the combination of high debt and persistent government deficits.

It is likely to get a slap on the wrist from the European Commission next week for failing to rein in borrowing. 

If it chooses populists and still-more borrowing, markets could lose faith.

James Mackintosh Wall Street Journal 13 June 2024

https://www.wsj.com/economy/global/why-bond-markets-are-so-spooked-by-the-french-election-7c4dd9ec