French markets stress out. Rest of Europe: not so much

The cost of insuring French government debt hit a 20-month high last week after President Macron called a snap election and spooked markets at the prospect of a hard-right victory. “Financial markets don’t really understand the National Rally’s project,” Marine Le Pen told Le Figaro this weekend, as tens of thousands gathered in Paris to oppose her party. National Rally has not yet published a manifesto, but an analysis of Le Pen’s economic policies in 2022 found they would have widened France’s deficit by over €100 billion a year. Analysts say the current chaos in France’s debt markets is unlikely to harm a broader rally in European bonds, catalysed by the European Central Bank’s decision to start cutting rates. But France has the third largest debt to GDP ratio in Europe and had its credit rating downgraded last month. This week Brussels will decide whether the country must undergo a mandated belt-tightening process known as the “Excessive Deficit Procedure”. Worth noting that Le Pen is not a fan of EU rules.