(Rpt for “advisory” putty, updated with RN and Bercy)
PARIS (Reuters) – French Minister of Economy and Finance Bruno Le Maire warned on Friday of the risk of a financial crisis in France if the union of the left or the far right came to win in the early legislative elections.
Asked to say on franceinfo whether the political unknown born from Emmanuel Macron’s decision to dissolve the National Assembly on the evening of the European elections carried financial risks, Bruno Le Maire responded in the affirmative.
The risk premium demanded by investors to hold French government bonds reached its highest level in more than four years on Friday.
According to LSEG data, the ten-year OAT yield is on track for its biggest weekly rise – of more than 25 basis points – since the 2011 eurozone debt crisis.
The OAT yield is at 3.17% at 0812 GMT and the “spread”, i.e. the difference between French and German 10-year borrowing costs, reaches 77 bp.
The yield on the ten-year German Bund, the benchmark for the euro zone, is down more than 8 basis points to 2.40%.
“We now borrow more expensively than the Portuguese,” said the minister. “It is not the question of the balance of public finances, it is the question of the projects which are on the table to know whether we can, yes or not, finance this debt”.
The National Rally (RN) of Marine Le Pen, which is leading the opinion polls ahead of the legislative elections, is proposing a reduction in VAT, notably to 5.5% on energy, food and essence.
Ratings agency S&P Global, which recently downgraded France’s credit rating, warned this week that policies pushed by the far-right party could impact the rating.
The left-wing parties, which announced Thursday an agreement on a common program with a view to the legislative elections, want to lower the retirement age and introduce a new wealth tax.
“With the projects of the far left and the far right, the debt cannot be financed,” added Le Maire.
The president of the RN, Jordan Bardella, broadcast a first campaign spot on social networks as well as a leaflet where he remains vague on his camp’s economic measures.
He does not quantify, for example, the planned VAT reduction and remains vague about his intentions if the far right took the reins of Bercy after July 7.
As a first measure, the National Rally wants an audit of French public finances but could submit a draft amending finance law (PLFR) to a vote without waiting for its conclusions, according to L’Opinion.
The RN proposes to reduce VAT on energy to 5.5%. During the 2022 presidential campaign, Marine Le Pen promised the abolition of VAT on one hundred food and hygiene products.
According to the Ministry of Economy and Finance, all of the reductions would represent a cost of 24 billion euros (10 billion euros for gasoline, seven billion euros for food, in particular).
(Reporting by Tassilo Hummel, Harry Robertson, Elizabeth Pineau, Leigh Thomas, written by Diana Mandiá, edited by Sophie Louet)
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