The Political Situation in France

French Market Interest Rates Rise Following Weekend Protests

The protests in France, which have spiraled out of control, have led to a rise in the yields on the country’s government bonds this Monday. The nation’s economy is already on shaky ground, following more than 50 years of budget deficits and amid uncertainty regarding whether the next government will be able to tighten fiscal policy.

The yield on the ten-year government bond rose by 7 basis points on Monday to 4.86 percent. Meanwhile, the yield on the German equivalent fell by 1 basis point, widening the spread between the two to 1.43 percentage points, reports DI.

This spread reflects concerns regarding the French economy. As yields rise, the cost for France to borrow money increases further.

Experts: Low Risk of a New Eurozone Crisis – In the Short Term

The risk of a new eurozone crisis remains limited in the short term, even though the protests in France are fueling anxiety in the financial markets. This is the assessment provided by observers to The Wall Street Journal and DI.

Most eurozone nations are in better shape and less reliant on foreign financing than they were during the debt crisis 15 years ago. Furthermore, the European Central Bank (ECB) now possesses new tools to prevent such unrest from spreading.

However, Cedric Gemehl, a Europe economist at Gavekal, warns of longer-term risks.

"If France continues to run a deficit of 5–6 percent over the coming years, it will significantly increase the risk of a eurozone crisis," he told DI.

Mike Bell of RBC BlueBay is more pessimistic. “There is a very real risk of a French sovereign debt crisis,” he tells CNBC.