France Debt Crisis

France faces a growing debt crisis and social unrest ahead of the presidential election.

France is dealing with a major debt crisis and social unrest ahead of its presidential election next year. Investors are demanding higher yields to hold French debt compared to bonds from Germany, which are seen as a safer alternative. The difference between the two countries' bond yields is widening due to "higher sovereign default risk in France," according to Macquarie's Thierry Wizman. The French government is trying to cut its budget to reassure investors but remains in a holding pattern until next year's election. Investors fear a potential fiscal crisis that could undermine the European Union's legal framework. France's far-right candidate, Marine Le Pen, has proposed creating a "golden rule" into the constitution to limit the deficit and limit spending. However, far-left candidate Jean-Luc Mélenchon has suggested that the country's central bank should cancel the roughly 18% of French debt it holds.