France should not play with its debt

The French Minister of Finance went into “grumpy mom” mode and squeezed a thin smile from the old market hands. The adult dealing with a recalcitrant teenager, to try to make him listen to reason, often resorts to the example of the family failure: “If you don’t do your homework, you will fail your exams and you will end up like Uncle Daniel.”

In the present case, Antoine Armand tried to convince the deputies to accept a compromise by evoking the cost of the French public debt being close to that of the former worst performer in the euro zone: “France is not Greece.”

Unspoken hierarchy

His statement highlights the unspoken hierarchy within a supposedly harmonious eurozone and shows that political leaders never tire of using edifying examples to encourage their adversaries and voters to understand the dangers it poses. there is playing with bond markets whose stakes exceed them. Grumpy moms all need an Uncle Daniel.

Given current borrowing rates, investors can only agree with Armand – but only half-heartedly. President Macron's electoral gamble this summer, which deprived the far right of power in Parliament thanks to the union in extremis around the center, hurt the price of French bonds for the rest of the year and maintained their rates at a high level, even though interest rates have fallen.

After starting 2024 at around 2.6%, the yield on ten-year French government bonds has climbed to almost 3% today. But what matters is the difference in yields between two countries. Today, the gap between Germany and France stands at almost 0.9 percentage points, the widest since the eurozone debt crisis ad