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Political uncertainty puts French financial markets under pressure

In World
June 11, 2024
A screen shot shows French President Emmanuel Macron speaking during a televised address to the nation during which he announced he is dissolving the National Assembly, French Parliament lower house, and calls new general elections on 30 June. Ludovic Marin/AFP/dpa

A screen shot shows French President Emmanuel Macron speaking during a televised address to the nation during which he announced he is dissolving the National Assembly, French Parliament lower house, and calls new general elections on 30 June. Ludovic Marin/AFP/dpa

The calling of early parliamentary elections in France continued to weigh heavily on the country’s financial markets on Tuesday.

The stock markets fell noticeably and the euro exchange rate also remained under pressure. Yields on French – but also Italian – government bonds rose sharply.

On Sunday, French President Emmanuel Macron surprisingly announced snap elections for the National Assembly. These are to take place on June 30 and July 7.

The reason for the announcement was the clear victory of the right-wing nationalist National Rally (RN) in the European Parliament elections. According to polls, National Rally is also ahead in the parliamentary elections.

The left-wing parties in France are aiming to run as an alliance in the elections, which also worsens the electoral prospects for Macron’s centrist bloc. Both the right-wing and left-wing parties are making big spending promises to voters.

The rating agency S&P Global Ratings, formerly Standard and Poor’s, recently downgraded France’s credit rating. On Tuesday, the rating agency Moody’s said the early elections would further jeopardize budget consolidation in France.

The prices of French government bonds came under renewed pressure on Tuesday. In turn, the yield on 10-year government bonds rose to 3.32%, its highest level since November 2023. Yields also rose noticeably in Italy.

The French CAC 40 fell by 1.22% to 7,798.5 points in the early afternoon. The euro fell to $1.0724, its lowest level since the beginning of May.

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