France’s deepening fiscal troubles start to rattle financial markets
(MENAFN)
Concerns are mounting over the European Union’s economic stability as France’s deepening fiscal troubles begin to rattle financial markets, according to reports referencing insights from ING Groep NV analysts.
The euro slid to its lowest level in a month this week, with analysts linking the decline to France’s newly unveiled austerity measures spearheaded by Prime Minister Francois Bayrou. His strategy—centered on major reductions in public sector employment and cuts to welfare programs—has stirred political controversy and raised doubts among investors about the minority government’s ability to implement reforms effectively.
In an analysis cited by reports, currency expert Francesco Pesole remarked that although the euro’s downturn was largely influenced by dollar strength, France’s fiscal and political uncertainties also played a significant role. “The French deficit story has been very much in the background as of late, but [Tuesday] probably served as a reminder that it is a ticking bomb for EU sentiment,” Pesole noted, adding, “We could start seeing some FX spillovers in the coming months.”
Bayrou’s aggressive €43.8 billion ($50.9 billion) plan targets a fiscal shortfall that climbed to 5.8% of GDP last year—nearly double the 3% threshold set by the EU. Speaking earlier this week, Bayrou described the national debt as a “mortal danger” and suggested controversial measures such as canceling public holidays and halting pension increases to enhance productivity and rein in spending.
The proposals have drawn sharp criticism, particularly from left-wing parties. Detractors have accused the government of placing defense expenditures above citizens’ welfare. Jean-Luc Melenchon, head of La France Insoumise, condemned the plan and demanded Bayrou’s resignation, declaring, “these injustices cannot be tolerated any longer.”
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