France’s ten-year yield has reached the same level as Greece’s for the first time.
The ten-year bond yield of Europe’s second largest economy is thus on par with that of the country that symbolizes the European debt crisis. Athens had to implement very tough reforms more than ten years ago, in exchange for billions in financial support to keep the country afloat.
French ten-year securities are traditionally considered a safe haven. But the ten-year interest rate has now risen to 3.03 percent, comparable to the Greek one. Until last year, Greek debt paper was classified as ‘junk paper’ by the major credit rating agencies, but now it is again considered investment-worthy.
Budget
The comparison is certainly not appropriate for Paris. Investors are concerned whether Prime Minister Michel Barnier will be able to push a budget through parliament and remain in power. If that were not the case, cuts and tax increases to tackle the budget deficit would be at risk.
President Emmanuel Macron had called early parliamentary elections, but the gamble backfired and his parliamentary bloc, which no longer had a majority, shrank. The parties that support Macron are now working with the traditional right, but the opposition, including left-wing parties and the extreme right, is still larger in the National Assembly.
At the peak of the European debt crisis, the Greek ten-year interest rate was more than 30 percentage points higher than the Greek one. A higher interest rate reflects more expensive loans or bonds with which countries finance themselves.