Despite assurances to the contrary from its economy ministry France, it seems, is being steadily drawn into the epicentre of the eurozone debt storm. There was more evidence of that when the rate investors charge for buying government bonds rose again.
These are worrying times, though no one is hitting the panic button yet, as Adam Myers, a senior strategist with Credit Agricole explained: “The revenue situation in France is nowhere near as detrimental as it is in some of the other larger sovereigns like Italy. So, I think it is an overreaction to place France in the same bucket as the periphery. However, the market will continue to test the resolve of politicians and I think with France that’s really where the line must be drawn.”
But, as France prepared for its latest bond auction the news from the markets was not encouraging. The rate inverstors charge to buy government debt rose by half a percent to 3.8 percent. It is nowhere near the alarm-bell ringing rates of around 7 percent that Spain and Italy are seeing, but the trend is a concern.
Spain has edged closer to that figure — the tipping point after which Greece, Ireland and Portugal had to seek international bailouts. The European Central Bank has previously intervened to keep Italian and Spanish borrowing costs at sustainable levels, but it has no mandate to do so and Germany is firmly resisting calls to turn it into the lender of last resort.