From the spread on the rise to the vote of suicidal trust, Paris lives the crisis that was once Italian. And now France risks higher yields than BTPs
We had used to us to be, the Italians, with our governments dancers and ramshackle accounts, to recite the part of the “great patient of Europe”. The symbol of our crisis was the sufficiency smile of Angela Merkel and Nicolas Sarkozy while the BTP collapsed and the spread went to the stars but things change and this time the French arrogance impersonated by Macron rises on the defendants’ counter. The government entered the resuscitation room by announcing a suicide vote of confidence for September 8. François Bayrou, premier without majority, chose Russian roulette: ask Parliament the green light from a 44 billion cuts plan. Too bad that the numbers are not there and the markets have understood it very well: the CAC 40 sinks (-1.5% after -1.6% on the eve) and bank securities with chests full of government bonds are massacred.
Rating agencies are ready to detach another red stamp on the French debt. Moody’s and Fitch had already put France in the sights. Now Pictet AM’s Christopher Dembik warns: “Markets are discounting an imminent declassing”. Translated: Paris risks paying his most expensive debt in Italy. A paradox that until yesterday seemed impossible.
Meanwhile, politics dissolves. Marine Le Pen and his Rassemblement National don’t even think about giving Bayrou oxygen. Jean-Luc Mélenchon, with the usual delicacy, has already ordered Macron to “leave”. The socialists make the scale needle but with more doubts than certainties. Result: the majority evaporates. And the Elysée is more and more insistently about early elections, the spectrum that Gérald Dermanin – Minister of Justice – has not excluded.
The markets, as always, do not wait for the times of politics. The spread between the French titles and the German bund widens at 77 basis points, the ten -year return flies to 3.5%. And here comes the big news: the French debt now costs almost as much as the Italian one. Once we were the danger for the euro, today it is up to Macron to pay the humiliation of more salty yields of the BTPs.
The Minister of Economy, Eric Lombard, tries to minimize but ends up admitting the obvious: “It is a risk that we run,” he says, even referring to the event of an intervention of the International Monetary Fund. The Paris spectrum commissioned by the IMF: stuff that not even in the worst nightmares of the Gollists.
For his part, François Villeroy de Galhau, governor of the Banque de France, tries to speak as an adult in a room of teenagers: “If we do not immediately face the debt, we will leave our children an unbearable burden”. A reference to the sense of responsibility that sounds like the voice of a principal to an unruly schoolchild. But who listens to it, in a parliament where everyone thinks only of making the squeezes?
The result is that France, once the heart of Europe, today finds itself doing the part that for years has been of Italy: unstable, indebted, under siege of rating agencies and with markets ready to hit. Except that this time Rome observes as a spectator, with a tip of revenge. We Italians were the chronic patient, Paris today is the patient in intensive care.
The problem, of course, is that when the patient is France, the contagion can spread to all of Europe. And then the future is written on its own: if the patient changes his name but the doctor is not there, the entire continent risks remaining without care.
