My dear impertinent ones,
Weak signal of a serious situation.
It didn’t last long, but the yield on the 10-year French bond exceeded that of the same Spanish bond on the secondary market, according to Reuters.
“It is a symbol that shows to what extent the market has placed France under close surveillance. According to the Reuters agency, the rate of the French 10-year Treasury bond (OAT) briefly exceeded that of the Spanish debt security of the same maturity. According to the agency, this is a first since 2008.
As a reminder, this rate is that of the secondary market, that is to say where investors exchange among themselves the debt securities of a State. Concretely this means that market operators demand a higher yield on French debt than that of Spain.
Ultimately, the two countries are at very close levels. At 11:40, the yield on the two 10-year debt securities was at 2.98%.
But the dynamics are intriguing. In one year, the Spanish 10-year loan rate has moved closer to that of France by around 50 basis points, or half a percentage point.”
In this case, the numbers are of no importance, the fact that Spain borrows at 2.98% and France at 2.99% does not change anything in itself, it is the financial symbolism in the minds of the markets that is important.
This means that in the minds of the financial markets, in the analysis carried out by international creditors, the Spanish risk and the French risk are now largely equal.
And for good reason, the Spanish deficit was 3.6% in 2023 and it is still forecast at 3% for 2024 where we will end the year reaching and even perhaps exceeding the 6% deficit if everything were to go badly by the end of the year, which is always possible.
The French deficit is therefore twice as high as the Spanish deficit.
Cut spending much more than raise taxes!
We must not delude ourselves, tax increases cannot, in the most taxed country in the OECD, be the solution to our problems.
We will have to reduce spending, particularly social spending which has become totally crazy.
I think that we can discuss the opportunity to reduce retirement pensions and that it is normal that many do not agree. I also think that everyone should agree on the fact that it is not part of national solidarity to pay back-to-school bonuses by the millions, or worse, Christmas bonuses to pay for end-of-year gifts. That is not solidarity. It is not even welfare anymore. It is pure demagogy and useless waste.
There is no such thing as free lunch.
The time for the bill arrives.
We will all pay.
The “rich” will necessarily pay more taxes, but those who think that aid will continue to be paid as before should not be mistaken.
The poor will also pay, without forgetting all those who depend on public spending.
There is no such thing as free lunch and when the markets no longer provide funding, there is no other solution than to pay within the limits of the available stocks of money in the state coffers.
And there they are empty.
If we do not calm down, the markets will take charge of bringing us back to reason, and it will be very violent.
When France borrows at the same price as Spain, it is a first warning shot that must not be ignored.
A weak signal of a situation of severe financial distress.
It’s already too late, but all is not lost.
Get ready!
Charles SANNAT
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