France Government Bond 10Y

France is heading into a new season of political brinkmanship that will test investors' patience with a showdown over the country's towering debt, as a week that began with a post-holiday cabinet meeting ends with the first of several credit reviews. With parliament gridlocked, the budget for the euro zone's second-biggest economy is the most perilous of Emmanuel Macron's decade-long presidency, coming ahead of a two-round presidential election on April 18 and May 2. The country's 10-year bond yield is above 4% for the first time in nearly two decades, and the premium over German equivalents has widened to 86 basis points. The government warned it will be difficult to deliver on this year's plan to reduce the deficit to 5% of economic output from 5.1% in 2025, with debt around 117% of output and rising. Prime Minister Sebastien Lecornu said he won't propose new taxes for 2027, instead seeking "structural savings," but faces opposition from parties like the Socialists and pro-business groups. Failure to pass a budget before the election could force emergency legislation and blow out the deficit by at least an additional 0.5 percentage points, according to the General Inspectorate of Finance. Fitch Ratings is the first of several agencies to review France's credit score, having downgraded it last fall, and analysts warn of further downgrades if the deficit widens significantly.