(Boursier.com) — The Parisian market stalled again this weekend with a CAC40 falling by 2% to 7,550 points. The Parisian index thus brings its weekly losses to nearly 6%, its biggest decline since March 2022! Concern about the political situation in France is growing day by day after President Emmanuel Macron decided to call early legislative elections. The fears of the operators are shared by Bruno the Mayor. The Minister of Economy and Finance warned this morning on ‘franceinfo’ that the victory of a new left-wing alliance in the next elections would lead to the country’s exit from the European Union. “Their program is complete madness,” the leader said. “This will guarantee downgrading, mass unemployment and an exit from the European Union.”
Emmanuel Macron dissolved the National Assembly on Sunday and announced the holding of this legislative election in two rounds on June 30 and July 7. The move has caused political chaos and spooked investors as the vote raises uncertainty over how the next government will approach France’s public finances. The National Rally is on track to win the largest number of seats, which would allow it to choose the next Prime Minister and give it significant weight in the formation of the new government, particularly with more influence in matters of economic policy.
Bruno Le Maire claims that the National Rally program is built on “lies” and estimates that his promise to reduce VAT on fuel oil, gas, electricity and food would cost the State 24 billion euros . According to the minister, with the projects of the far left and the far right, France’s debt could not be financed.
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.
In this context, the risk premium required by investors to hold French government bonds reached its highest level in more than four years on Friday. Despite a slight relaxation in the 10-year OAT rate (-4.5 bp to 3.118%), the “spread”, i.e. the difference between French and German 10-year borrowing costs, reached 73.5 bp (+4.5 bp) after a high of 77 bp.
“It is difficult to ignore the parallels between our current situation and the days of the sovereign debt crisis, given the focus on election results, sovereign bond spreads and the viability of debt,” Jim Reid, an analyst at Deutsche Bank, told ‘Bloomberg. Furthermore, there are “no obvious signs as to which direction things will take.”
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