Political upheaval in Paris is prompting the financial vulnerabilities of the Eurozone’s second-biggest economy to be reappraised, investors have warned.
Many fear that the prospect of dysfunctional politics, flagging growth and a steadily rising debt burden may dent France’s long-term attractiveness to foreign investors who hold around half the country’s government debt.
Traders doubt that this will result in turmoil akin to the gilts market crisis triggered by former UK prime minister Liz Truss in 2022, as the country’s finance minister has warned. But they fear that France’s bond market could increasingly resemble Italy’s over time, facing permanently higher borrowing costs and becoming a potential flashpoint when bloc-wide crises hit.
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