The Barclays strategists said that a sudden change in government could also see a sharp sell-off in French stocks, as well as a rise in French bond yields, potentially pushing the spread to 100 basis points or higher.
They added that France’s debt levels are also a concern, with the country’s public debt currently at around 105% of GDP, well above the EU’s 60% limit. This could lead to credit rating downgrades and higher borrowing costs, further exacerbating the country’s economic woes.
Despite these challenges, French President Emmanuel Macron remains popular and could potentially win re-election in 2027 if he can navigate the current political turmoil and implement much-needed reforms, the strategists said.
They noted that Macron’s approval ratings have improved recently, and he has a strong chance of winning a second term if he can successfully tackle issues such as high unemployment, low growth, and social unrest.
„The next few months will be crucial for France,” the Barclays strategists concluded. „A stable government and a clear path towards fiscal sustainability are essential for the country to avoid a full-blown crisis and regain investor confidence.”
