(Bloomberg) — Investors are demanding the biggest premium in more than a decade for holding French bonds compared to safer German debt, as concerns grow that parties vying for France’s upcoming parliamentary elections could further swell public finances.
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The difference between the two countries’ 10-year bond yields rose by three basis points to 80 basis points on Friday, the widest on a closing basis since 2012, when the euro zone was at the depths of the debt crisis. Some investors say the difference could be as high as 100 basis points.
France’s left-wing alliance unveiled plans earlier in the day to tackle the country’s economic challenges, including €150 billion in additional annual spending by 2027. It also confirmed intentions to drop a number of presidential candidates . Emmanuel Macron‘s pro-business reforms.
French markets sold off sharply after Macron dissolved the National Assembly and called a snap vote as his party was defeated by Marine Le Pen’s far-right National Rally in the European Union elections. The election gamble has brought France’s long public accounts back into the spotlight and raised questions about the future of Macron’s agenda.
On Wednesday, the European Commission reprimanded France for running its budget deficits above the bloc’s 3% limit, subjecting the country to the so-called Excessive Deficit Procedure that requires corrective action and could lead to fines for non-compliance.
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