On the markets, France's borrowing rate exceeded that of Greece for the first time

France's borrowing rate briefly exceeded that of Greece on Wednesday on the markets, an unprecedented situation which reflects investors' fears about the French political situation. On the bond market, where debt already issued is traded, Greece's ten-year borrowing rate stood at 3.02% around 2:15 p.m. GMT, just like its French equivalent.

Earlier in the session, the French rate reached 3.05%, marking a difference in favor of Greece, minimal, but symbolic more than ten years after the euro zone crisis. This means that the market today believes that there is as much risk in lending to France as to Greece. “France has room for maneuver, of course, but the symbol is there”commented Aurélien Buffault, bond manager of Delubac AM interviewed by AFP. “These are two divergent trajectories of public finances: Greece is rebounding after having gone bankrupt and being placed under the supervision of the International Monetary Fund (IMF)”he continued.

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“A drift that has lasted for a long time”

On Tuesday, the gap between French and German borrowing rates reached its highest level since 2012. The deterioration of France's public finances on the other hand “has worsened due to the Covid-19 crisis, but in reality it is a drift that has lasted for a long time: the country lost its triple A in 2012 and has since continued to see its rating downgraded”detailed the manager. On Friday, France will once again be put on the grill by a rating agency, S&P Global Ratings, after having already received warnings from Moody's and Fitch in October.

The decision by S&P Global Ratings comes as the executive is struggling to convince of the relevance of its proposed budget for 2025, which aims to restore very degraded public finances. The government plans to use article 49.3 of the Constitution to have the Social Security and State budgets adopted without a vote, each time risking being overturned by a motion of censure from the left, which the RN threatens to support. However, “France has one of the best managed debts in the world and is considered very liquid, which means that it can be bought and sold very quickly, a very positive factor”shade Aurélien Buffault. “Despite numerous warning signs, France is not on the edge of the cliff and remains a structurally rather rich country”added the bond manager.