French markets close to lows due to possible government collapse

This article was originally published in English

The French stock exchange emphasized loss on wednesdayThe CAC 40 index fell 1.3% to 1.3%, amid the ongoing political turmoil. This is the lowest level since August 6The benchmark index recovered some losses and closed 0.72% lower, but remains at its lowest in four months. On Thursday, the index opened in the green at 7,180.19, up 0.56%.

Prime Minister of France, michael barnierIf he uses constitutional instruments to push his budget plan, he faces the possibility of being removed from office by opposition parties. Both leftist and far-right parties National team They have the power to introduce censure motions and overthrow the French government.

French markets underperform their global counterparts

The French stock market has come under pressure from the political turmoil of recent months. CAC 40 is one of the some values ​​with negative results This year, while all global benchmark indices have shown strong gains.

The index is down 5.3% so far this year, compared with the Euro Stoxx 600’s 5.6% rally and the DAX’s 15% rise. on a global scale, wall Street The S&P 500 surged nearly 26% and hit repeated new highs. China’s Hang Seng index has climbed 13% this year,

French banking stocks were hardest hit by uncertainty over the country’s public finances. On Wednesday, BNP Paribas SA shares fell as much as 3%, hitting a new six-month low. Shares of France’s largest bank fell more than 11% That contrasts with an 18% rise in the Euro Stoxx 600 banking index so far this year.

political unrest in france

Emmanuel Macron called early elections in June, resulting in a minority government after the appointment michael barnier As the new leader. The veteran conservative unveiled his budget plan, which aims to reduce public debt levels through sweeping spending cuts and tax increases. However, The project has faced strong opposition from leftist alliances and Marine Le Pen, the far-right populist leader of the National Rally.

This political blockade creates apprehension crisis like Greece, Because France’s deficit this year is expected to reach 6.1% of its gross domestic product (GDP), more than double the required limit. European UnionAccording to the European Commission forecast, France’s debt-to-GDP ratio will reach 112.4% in 2024, the second highest in the EU.

government planReduce this ratio by 5.1% Next year is widely considered unattainable. In May, S&P Global Ratings downgraded France’s credit rating to AA- from AA, forecasting a deficit level of 3% of GDP by 2027.

Concerns about France’s political and financial stability have widened the spread between bond yields. German and French public debt – a key measure of market risk sentiment – up 86 basis points, the highest level since July 2012.

There may be further pressure on the euro

Germany’s auto industry crisis and Trump’s tariff threat, as well as France’s political uncertainty, further exacerbated the eurozone’s gloomy economic outlook.

This is likely to be caused by further devaluation of the euro Against other currencies of the G-10 group, especially the US dollar. EUR/USD fell slightly overnight to 1.05 at 5:50 CET this evening, remaining near a one-year low.