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French bond yields rose slightly above Greece’s on Thursday, amid concerns that a row over an austerity budget could topple Prime Minister Michel Barnier’s government.
France’s 10-year yield, which moves inversely with prices, rose to 3.022 percent in early trade, slightly ahead of Greece’s yield at 3.013 percent.
Greece’s yield later fell to 2.987 percent, while France’s was 2.978 percent. Greece was at the heart of the Eurozone debt crisis a decade ago.
Antoine Armand, France’s finance minister, on Thursday called on the opposition parties not to weaken the country by pursuing their own interests.
Speaking on BFMTV, he said France had decided: “We can remain responsible and work together to prepare the budget . . . or there is another uncertain path and . . . to rush to budgets and finances that are not known.”
Barnier’s small government is trying to complete a budget that will set €60bn of tax increases and spending cuts. The government does not have enough votes in the Parliament, so it has to use the constitutional mechanism to remove the MPs from passing the Budget, which would lead the opposition to choose a vote of no confidence.
Barnier’s future will largely rest in the hands of far-right leader Marine Le Pen whose Rassemblement National party is the most important vote in the assembly. Le Pen has increased the threat that the RN will go against the government if its budget demands, such as not raising taxes on electricity or reducing the reimbursement of medicine and doctor’s visits, are not met.
Barnier and Le Pen’s aides have been in secret talks in recent days. Armand said the government was “clearly prepared to provide funds to avoid the storm” on the financial markets, adding that the opening included the issue of the energy tax that Le Pen has prioritized.
France’s budget deficit is about to exceed 6 percent of GDP this year, double the EU target of 3 percent. Brussels has placed France in a “high deficit” review to force it to reduce the deficit for five years.
When asked about the willingness to refund health care costs, Armand said “we are ready to refund everything in every region”, adding that the budget cuts are so important that efforts should be made across the region.
Barnier’s government has been forced to spend on the budget presented in recent weeks, which would prevent its goal of returning to the deficit of 5 percent of the country’s output by the end of 2025. to finish above 6 percent of GDP – beyond the EU’s limit of 3 percent of GDP.
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