In the previous debt crisis, Europe was looking towards its region. Today, anxiety turns to her heart. France, the second largest economy in the European Union, sees its financial deadlock turning into a market confidence problem — and give birth to a new, sharp acronym: FROGS.
THE «frog» is not a new group of countries, according to the PIIGS standard. The letters refer to «French Oversized Government and Social Security», i.e. the oversized French state and the social security system.
The term, associated with the Rexecode Research Institute, illustrates the debate on the burden of public expenditure. Bloomberg Opinion adopts him in Lionel Laurent's column title: «FROGS Is the Name of Europe’s Latest Debt Crisis».
Behind the pun lies a much more serious shift: a country of the economic core of Europe is now faced with suspicion which was once reserved in the district. And together he returns the question that marked the previous crisis: how far can the ESF To prevent the next one?
France at regional rate
Change is reflected in borrowing costs. As the EFG International points out in its analysis, the yield difference between French and German bonds has returned to levels that refer to the sovereign debt crisis.
Investors not only assess the current level of debt. They also appreciate the possibility of continuing to increase, due to weak growth and political inability to achieve lasting financial correction. The 2027 presidential election approach makes it even more difficult to build a consensus on painful decisions.
EFG does, however, make a critical distinction: the image of short-term returns does not suggest that the markets discount a direct solvency crisis of the French State. Disbelief mainly concerns the future course.
That leaves time for reaction. It does not guarantee that time will be used.
The problem goes beyond Paris
The rise in returns is gradually transferred to debt service costs, as older versions are replaced by more expensive ones. Thus, a government that is already having difficulty reducing the deficit can face additional interest costs.
Concern acquires a European dimension when investors start reviewing other state titles. The Wall Street Journal, in the analysis «The Global Bond Rout Is Getting Messy», describes pressure in France, Italy and Greece, pointing out that forced sales and deterioration of liquidity can strengthen the turmoil.
Spain adds political uncertainty With the early election. Reuters Breakingviews highlights the distance between strong overall growth and social discontent, particularly around housing.
Countries have different weaknesses. In an environment of mistrust, however, markets can raise their funding price at the same time.
The «Whatever it takes» conditions
The ECB currently has more tools to protect the single monetary policy. Their existence, however, is not equivalent to the automatic support of any government that sees its yields rising.
The monetary policy protection tool, known as the TPI, was created to address unjustified and disorderly pressures in financing conditions.
There lies the difficulty of the French case. As Reuters explains, when increased borrowing costs reflect concerns about public finances and the political situation, it is harder to call it unjustified.
The TPI criteria include fiscal compliance, debt sustainability and the implementation of prudent economic policies. The inclusion of a country in an excessive deficit procedure is not in itself an automatic exclusion: it is important that it takes effective measures in accordance with European recommendations.
Frankfurt therefore needs to distinguish between a dangerous market failure and the re-evaluation of a real financial risk.
An intervention before bond markets
Στους Financial Times διατυπώνεται μια διαφορετική πρόταση: προσωρινή παύση της ποσοτικής σύσφιξης.
Καθώς η ΕΚΤ περιορίζει το χαρτοφυλάκιό της, περισσότερα κρατικά ομόλογα πρέπει να απορροφηθούν από ιδιώτες επενδυτές. Σε περίοδο έντασης, αυτό μπορεί να επιβαρύνει τις αποδόσεις. Η ανάλυση επισημαίνει επίσης τη μεγαλύτερη παρουσία μη τραπεζικών επενδυτών και τον κίνδυνο επανατροφοδότησης του δεσμού τραπεζών και κρατικού χρέους.
Μια τέτοια κίνηση θα μπορούσε να μειώσει μέρος της πίεσης στην αγορά συνολικά, χωρίς να προϋποθέτει στοχευμένη αγορά γαλλικών τίτλων.
Πότε η ανησυχία γίνεται κρίση
Η κεντρική τράπεζα της Γαλλίας περιγράφει στην έκθεση χρηματοπιστωτικής σταθερότητας τους διαύλους μέσω των οποίων ο κρατικός κίνδυνος επηρεάζει τράπεζες και επιχειρήσεις. Η μόχλευση και οι απαιτήσεις πρόσθετων εγγυήσεων μπορούν να προκαλέσουν πωλήσεις που επιδεινώνουν την αρχική αναταραχή. Παράλληλα, επισημαίνει την ανθεκτικότητα του χρηματοπιστωτικού συστήματος.
Η σημερινή εικόνα δεν αρκεί για να προεξοφληθεί επανάληψη του 2011. Αρκεί, όμως, για να απαιτήσει προσοχή: όσο η πολιτική αδυναμία παρατείνεται, τόσο αυξάνεται ο κίνδυνος ένα διαχειρίσιμο δημοσιονομικό πρόβλημα να εξελιχθεί σε ευρύτερη χρηματοπιστωτική πίεση.
Η ΕΚΤ μπορεί να αντιμετωπίσει μια δυσλειτουργία των αγορών. Τη συναίνεση που χρειάζεται η Γαλλία για να αποκαταστήσει τη δημοσιονομική της αξιοπιστία θα πρέπει να την παράγει το Παρίσι.
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