Euro zone ministers to tell France to pass 2027 budget to calm markets
TLT•Euro zone finance ministers and the European Central Bank are set to urge France to pass a 2027 budget as its 10-year bond yield has risen nearly 80 basis points since September and reached its highest level since July 2002, just short of 5%. Officials said the situation does not warrant ECB bond purchases.
1. Budget urged to calm markets
Euro zone finance ministers and the European Central Bank are set to tell France on Thursday to pass a 2027 budget, as French borrowing costs hover at 25-year highs. Officials said France has the means to respond and that agreeing on a budget should be the main message at their meeting in Luxembourg.
2. Yields and fiscal pressures
France’s 10-year bond yield has risen nearly 80 basis points since the start of September and hit its highest level since July 2002, just short of 5%. France said in September that its budget deficit would exceed the government’s 5% target this year; it has announced tightening measures, but investors are skeptical they can be carried out given parliamentary fragmentation and the 2027 elections.
3. No ECB bond purchases expected
Officials said France’s situation did not warrant ECB secondary-market bond purchases. France plans to sell a record €340 billion ($381 billion) of bonds in 2027 to fund the government and refinance COVID-era debt. Officials expressed concern that French borrowing could create conditions for a broader crisis, but said there was no sign of contagion to other euro zone countries.
