French Street Battles Drive Investors to Favor Italy and Greece Over France

Street battles in France are fueling financial market fears about the euro, with international investors now viewing the country more critically than Italy or Greece. Yields on French government bonds, a risk indicator, have reached their highest level since 2002. Despite a relatively calm night into Tuesday, ten-year French bond yields rose to nearly 5 percent, the highest since 2002. Investors now demand higher returns for French debt, with the risk premium over German bonds exceeding 1.5 percentage points, the highest since the European debt crisis. This compares to lower premiums for Italy and Greece. France's record-high absolute debt of 3.6 trillion euros, a budget deficit above 5 percent, and weak growth have made it the eurozone's main concern. The euro has lost over 4 percent against the dollar and 3 percent against the franc in recent weeks. While the European Central Bank could intervene, political instability and opposition threats to topple the minority government complicate efforts to address the crisis.