09-08-2025, 07:59 PM
https://www.dw.com/en/could-frances-econ...%20worried.
Given the much more central role the European states are expected to play in Ukraine vs Russia, the economic situation in France is particularly relevant. While the article mostly quotes experts that believe the crisis is not immediate, there are lots of very plausible scenarios where it would indeed become immediate. As the article points out, this problem has been festering for years. The fact France has kept a lid on it so far makes people assume they can continue to do so. Bankruptcy comes slowly and then rapidly. A lot of political instability, including strikes and riots, could easily drive the interest rate on French bonds well above what France could pay. The buyers could also definitely be scared off. The ECB in the past has been able to rely on Germany to "bail out" problem nations, like Greece. Right now, Germany isn't all that flush. France has MUCH bigger debt than Greece, so proportionally more "bail out" money would be needed. Germany also intends to borrow many billions to increase their defense spending. That intent will definitely sop up lots of the available bond demand. German bonds, while weaker than they were, are still much "safer" than French ones. It has the makings of a "perfect storm".
Given the much more central role the European states are expected to play in Ukraine vs Russia, the economic situation in France is particularly relevant. While the article mostly quotes experts that believe the crisis is not immediate, there are lots of very plausible scenarios where it would indeed become immediate. As the article points out, this problem has been festering for years. The fact France has kept a lid on it so far makes people assume they can continue to do so. Bankruptcy comes slowly and then rapidly. A lot of political instability, including strikes and riots, could easily drive the interest rate on French bonds well above what France could pay. The buyers could also definitely be scared off. The ECB in the past has been able to rely on Germany to "bail out" problem nations, like Greece. Right now, Germany isn't all that flush. France has MUCH bigger debt than Greece, so proportionally more "bail out" money would be needed. Germany also intends to borrow many billions to increase their defense spending. That intent will definitely sop up lots of the available bond demand. German bonds, while weaker than they were, are still much "safer" than French ones. It has the makings of a "perfect storm".