Euro Tumbles Amid France Political Crisis
France’s latest government collapse has reignited turmoil across European markets, sending the euro lower and testing investor confidence in the bloc’s ability to maintain political and fiscal cohesion. The resignation of Prime Minister Sbastien Lecornu has jolted markets and intensified concerns that France, as the political and economic heart of the eurozone, is becoming ungovernable.
Market Reaction
French stocks fell sharply, with the CAC 40 down around 2% as banking shares led losses. Yields on 10-year French bonds climbed to 3.56%, while the spread over benchmark German Bunds widened to 0.88 percentage points, close to its highest level since the sovereign debt crisis.
Investor Perception
Nigel Green, CEO of deVere Group, highlights the euro’s 0.6% drop against the dollar as a reflection of renewed unease about Europe’s political and financial stability. He emphasizes that France’s crisis has given investors reasons to lose confidence in European markets.
Macron’s Dilemma
The sudden exit of Lecornu, the third prime minister to resign since President Emmanuel Macron called snap elections in 2024, has deepened the perception of governance crisis in France. Macron now faces the challenge of appointing a new leader amidst a divided National Assembly, risking further instability.
Economic Impact
Germany’s slowdown, Italy’s fiscal pressures, and falling industrial output have already weakened investor confidence in Europe. France’s political turmoil adds another layer of risk, leading to concerns about exposure to sovereign debt and a wider spread between French and German bonds.
Conclusion
Nigel Green warns that Europe’s inability to project stability and control could erode investor confidence further. The ongoing political challenges across the region cast doubts on the capacity of European governance to deliver the needed stability.
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