European stocks are set to open in negative territory Thursday, with French markets in focus after Prime Minister Michel Barnier’s government was toppled in a vote of no confidence Wednesday.
A majority of lawmakers from both the left-wing New Popular Front alliance and the far-right National Rally supported a no-confidence motion in the country’s lower house yesterday evening.
Motions had been tabled by both the left- and right-wing blocs Monday after Barnier, who has been in power for only three months, used special constitutional powers to force a social security budget bill through Parliament without a vote. The move angered opposition parties and, last night, deputies on the left and right ousted the government.
Barnier is expected to resign on Thursday but could remain in charge of a caretaker government while President Emmanuel Macron searches for a replacement.
Elsewhere overnight, Asia-Pacific markets traded mixed after Wall Street stock benchmarks notched record highs yesterday. U.S. stock futures were broadly unchanged on Wednesday night.
There are no major earnings or data releases in Europe on Thursday.
France faces bond market jitters but it is not Greece in 2010, economist says
France is facing an unsustainable debt trajectory and higher bond yields, but its situation is not the same as the Greek sovereign debt crisis of 2010, according to George Lagarias, chief economist at Forvis Mazars.
“France is not insolvent, to begin with, A, and B, big countries, G7 countries, they don’t get debt crises in the 21st century. This is the purview of smaller countries. Greece was insolvent way before any of that happened,” Lagarias told CNBC’s “Squawk Box Europe.”
France has faced months of political instability since its snap summer election, and its minority government was ousted in a no-confidence vote on Wednesday.
French borrowing costs have risen to a 12-year high against Germany’s amid concerns that it will not be able to pass a budget to reduce its deficit, while its bond yields drew level with Greece’s for the first time on record. That was seen by analysts as a symbolic milestone, given France’s stronger fundamentals and Greece’s turbulent market history, which saw its bonds downgraded to junk status in 2010 and subsequent bailouts.
“France is going through something, it’s political tumult… There might be some jitters in the bond markets because bond markets are really upset about inflation and tariffs. So, some of that could seep into the bond markets going forward, some of that uncertainty. But France is not Greece,” Lagarias said.
“We have to acknowledge it’s not the eurozone crisis, [countries] can borrow their way out of trouble, just not at the pace that they’re used to. We have debt acceleration, and that happens everywhere in the world right now. The U.S. is the primary culprit.”
