PARIS, June 14 (Reuters) – French Minister of Economy and Finance Bruno Le Maire warned on Friday of the risk of a financial crisis in France if the left or the far right unite came to win 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”.
Marine Le Pen’s National Rally (RN), which is leading opinion polls ahead of the legislative elections, is calling for a reduction in VAT, particularly 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. (Reporting by Tassilo Hummel and Harry Robertson, written by Diana Mandiá)
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