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France’s borrowing costs briefly rose above those of Greece on Thursday, amid concerns that a dispute over a belt-tightening budget could topple Prime Minister Michel Barnier’s government.
French 10-year bond yields, which move inversely to prices, rose as high as 3.022 per cent in early trading, taking them marginally above Greece’s yields at 3.013 per cent.
Greek yields later dipped to 2.987 per cent, while France’s were 2.978 per cent. Greece was at the heart of the Eurozone debt crisis more than a decade ago.
Antoine Armand, the French finance minister, on Thursday called on opposition parties to not weaken the country for the sake of pursuing their own political interests.
Speaking on BFMTV, he said France had a choice: “We can still be responsible and work together to improve the budget . . . or there is another road of uncertainty and . . . leaping into the budgetary and financial unknown.”
Barnier’s minority government is trying to finalise a budget that will impose €60bn of tax increases and spending cuts. The government does not have enough votes in the National Assembly, so it will probably have to use a constitutional mechanism to override lawmakers to pass the Budget, which would allow the opposition to call a no-confidence vote.
Barnier’s fate will largely be in the hands of the far-right leader Marine Le Pen whose Rassemblement National party is a key voting bloc in the assembly. Le Pen has ramped up threats that the RN will move against the government if its budget demands, such as not raising taxes on electricity or cutting reimbursement for medicines and doctors’ visits, were not met.
Aides to Barnier and Le Pen have been negotiating privately in recent days. Armand said the government was “obviously prepared to make concessions to avoid the storm” on financial markets, adding that the opening included the electricity tax issue which Le Pen has made a priority.
France’s budget deficit is on track to exceed 6 per cent of GDP this year, more than double the EU’s target of 3 per cent. Brussels has put France in an “excessive deficit” monitoring process to push it to cut deficits over a five-year period.
Asked about the willingness to make concessions on healthcare costs, Armand said “we are ready to make measured concessions in any area”, adding that budget cuts were needed so efforts would have to be made across the board.
Barnier’s government has been forced to make concessions across the proposed budget in recent weeks, which may render impossible its goal to bring back the deficit to 5 per cent of national output by the end of 2025. France overshot its deficit target for this year and will finish at above 6 per cent of GDP — far above the EU limit of 3 per cent of GDP.
