- IMF Managing Director Kristalina Georgieva said France must bring its deficit under 5% of GDP to reassure bond markets, calling on the government to 'get your house in order.'
- French 10-year government bond yields have climbed more than 100 basis points since the start of the year, with investors now demanding a higher yield on French OATs than on Italian government bonds.
- France is subject to the EU's excessive deficit procedure after its deficit reached 5.1% of GDP last year; the government is targeting a fiscal adjustment worth tens of billions of euros.
- The budget negotiations are unfolding against a backdrop of nationwide student protests that have turned violent, complicating the political path to spending cuts.
- Georgieva said Europe is better protected now than during the early 2000s sovereign debt crisis, citing the strength of the ECB and other instruments developed to protect against financial stability risks.
Quotes
“get your house in order”
“Bond markets respond to fundamentals, and the fundamentals have changed”
“it's going to be tough, no question about it”