Key Facts:

1. Market Impact: French 10-year bond yield spreads hit their highest since 2012, reflecting investor concerns about political instability.
2. Budget Controversy: The €60bn budget proposal includes significant austerity measures, risking parliamentary backlash.
3. Political Stakes: Far-right leader Marine Le Pen’s party could trigger a no-confidence vote, threatening government collapse.
4. Debt Concerns: France’s budget deficit exceeds 6% of GDP, far above the EU’s 3% target.
5. EU Oversight: France is under an EU “excessive deficit” procedure, pressuring it to reduce deficits within five years.

French financial markets are under pressure as Prime Minister Michel Barnier faces a political and fiscal crisis. His proposed €60bn budget, featuring spending cuts and tax hikes, has been met with fierce opposition, risking a no-confidence vote that could topple his government. Investor concerns have pushed 10-year French bond yields above 3%, nearing levels seen in Greece, signaling heightened debt sustainability fears. The budget deficit, projected at over 6% of GDP, has drawn scrutiny from Brussels, placing France under “excessive deficit” monitoring. Political uncertainty compounds economic challenges, with the government struggling to reassure markets. 

Source:  FT