France’s finance minister has issued a warning that the country could potentially face a debt crisis similar to the UK’s gilt market turmoil under former Prime Minister Liz Truss if the far-right Rassemblement National wins upcoming snap elections. Market nerves have been evident as French government bonds have sharply sold off following President Emmanuel Macron’s announcement to dissolve parliament and call for fresh elections after a significant far-right victory in European elections.
The gap between French and German borrowing costs has widened significantly, pushing French bond yields to their highest level in months. The potential rise of the Rassemblement National party has raised concerns about the country’s ability to finance additional spending associated with its agenda, leading to further market uncertainty. Investors remain cautious as the looming snap elections could impact France’s fiscal sustainability and credit ratings, creating a sense of unease in the market.
Despite the bond sell-off, the situation is not as intense as previous years when far-right candidates posed a greater risk to France’s economic stability. However, analysts warn that future elections, particularly the presidential race in 2027, could present a larger challenge to market stability should the far-right maintain significant political momentum. As France grapples with economic challenges and political uncertainty, the impact of potential far-right victories on the country’s fiscal policy remains a critical issue for investors and the broader market.
