Far-right and leftist parties gaining momentum in France's election causing budget crisis concerns.

From Investing.com: 2024-06-15 21:00:33

Far right and leftist parties gain momentum in France’s surprise parliamentary election, posing risks of a budget crisis in the euro area under Macron’s centrist administration. Le Pen’s National Rally party leads in polls favoring retirement age cuts and tax reductions, raising fiscal concerns in the eurozone’s second largest economy following a credit rating downgrade.

Investors demand higher yields on French government bonds, marking a significant jump as far-right and leftist parties maintain strong positions in opinion polls. Finance Minister Le Maire warns of potential financial crisis if either far right or left wins the election, driving up cost of insuring France’s debt against default to highest levels since May 2020.

French bank stocks plummet as market ructions impact funding plans, with BNP Paribas, Credit Agricole, and Societe Generale losing between 12-16% this week. French state-backed agency cancels bond sale as rising borrowing costs lead to reduced financing at bond auctions. Euro zone bond investors wary of fiscal sustainability concerns, reminiscent of UK and US market stress tests.

National Rally party’s program for the 2022 election could cost over 100 billion euros, suggesting significant increase in France’s budget deficit if fully implemented. Concerns over fiscal responsibility arise as party is vague about financing details, with potential for a blowout in yield spreads similar to UK’s budget crisis in 2022. Euro weakens against the dollar as bank stocks decline in the bloc.



Read more at Investing.com: French election worries rekindle market memories of UK budget rout By Reuters