French Financial Turmoil: Snap Elections Deepen Crisis Fears

French Finance Minister Bruno Le Maire warned of a potential financial crisis due to political instability following President Emmanuel Macron's decision to dissolve parliament and call snap elections. The risk premium for French government bonds surged, reflecting investor concerns. Policies from both Marine Le Pen's National Rally and a new leftist alliance could impact France's credit rating.

French Finance Minister Bruno Le Maire on Friday warned the euro zone's second-biggest economy faces the risk of a financial crisis since it was thrown into turmoil by President Emmanuel Macron's decision to dissolve parliament and call snap elections.

Asked on franceinfo radio whether the current political situation in the country could lead to a financial crisis, Le Maire said 'yes'. The risk premium investors demand to hold French government bonds hit a more than four-year high on Friday. French bond yields are set for their biggest weekly jump - of over 20 bps - since the euro debt crisis, LSEG data showed.

"Today, we are paying more than Portugal for our debt," Le Maire said, adding: "This is because of the political programmes that are on the table with regard to the question if we will be able, yes or no, to keep financing this debt." Marine Le Pen's eurosceptic National Rally (RN), which currently leads opinion polls, calls for a lowering of the retirement age and a protectionist "France first" economic policy approach.

Ratings agency S&P Global, which recently downgraded the country, said policies advocated by the party could have implications for the credit rating. A newly formed alliance across France's left on Friday said it also wanted to lower the retirement age and introduce a new wealth tax for the rich.

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