June 17, 2024 at 06:15AM
It is said that the policymakers hadn’t reached a point of discussing the need to dip into their emergency bond-buying scheme to offer support for French debt. However, the sources say that there are varying degrees of concern surrounding French bonds.
For some context, French bonds suffered quite a selloff last week after a snap election was called. That came after Le Pen’s far-right faction, National Rally, is looking to take over the political stronghold there. The risk premium of French bonds against their German counterparts had risen by the most since 2011.
But there are no plans yet to discuss the need to utilise the ECB’s Transmission Protection Instrument (TPI) with regards to this matter, at least for now. The other issue is that France is running a higher deficit than what the EU rules allow for. That’s a challenge for TPI utilisation as it requires countries to comply with parameters surrounding the EU’s fiscal rules.
Anyway, the main worry now is that France may see a similar political transformation to that of Italy in 2022, when Meloni took charge. In the case of Italy, Meloni has toned down her hostile approach towards the EU. And in the case of France, policymakers and lawmakers would be hoping for the same if Le Pen rises to power.
This article was written by Justin Low at www.forexlive.com.
