Credit rating agency Moody’s economist Kamil Kovar has warned that the current situation in France could potentially lead to a new euro crisis. He notes that while deficits have improved in most countries, debt levels, especially in Italy, have worsened. Additionally, interest rates are higher than they were in the previous decade, leading to increased interest payments.
Kovar describes the situation in the euro area as “exceptionally explosive” and highlights the upcoming French parliamentary elections on June 30 as a key factor. Concerns are growing in the markets, with rising interest rates on French and Italian government bonds since French President Emmanuel Macron announced the dissolution of the National Assembly.
Experts point out that the interest rate difference between France and Germany is the widest it has been since 2012. The future will depend on how the situation in France impacts interest rates on government bonds in other euro countries, particularly Italy. Despite hopes that the European Central Bank (ECB) may intervene, Kovar reminds that the ECB’s tool cannot be used in countries under the EU’s deficit procedure, which includes France and Italy. He suggests that the crisis can be avoided if Marine Le Pen does not win the election or if she avoids a confrontation with
