Spain's bond spread holds at 67 points as France's soars past 170
France's risk premium has climbed above 170 basis points, nearly triple Spain's at 67, amid the French country's political and budget crisis
English · Original discussion in Spanish · Published
Spain's bond spread holds at 67 points while France's soars past 170
Spanish debt is holding up. French debt is not. With the French risk premium above 170 basis points and Spain's at 67, the gap between the two neighbours has become the economic story of the week: France carries almost three times the risk the markets assign to Spain. The headline, celebrated as good news in some economic forums, hides a less comfortable reading. Your sick neighbour getting worse doesn't cure you.
What it means for France's risk premium to exceed 170 points
The risk premium measures the extra cost a state pays to borrow compared with the German bond, the benchmark considered risk-free in the eurozone. France paying more than 170 basis points while Spain pays only 67 shows that investors currently see more danger in Paris than in Madrid. France's political and budget crisis explains much of that punishment. The analysts quoted also warn of the risk of contagion to other countries, though they rule out a repeat of the 2011 debt crisis.
The nuance matters. A risk premium of 67 points is no small thing: it remains a serious problem, as it was when Spain was hovering around 640 in 2012. The comparison with France is comforting, but it solves nothing.
Why Spain is not safe even if France is worse off
The lesson of the previous debt crisis is uncomfortable. Greece was in worse shape than Spain, and that did not prevent deep cuts or a severe crisis. Contagion ignores rankings: if the big partner wobbles, credit becomes more expensive for everyone. Spain's premium is also rising, even if from a lower level.
Some recall that during the housing crisis Spain's public debt went from 30% to 100% of GDP, that unemployment neared 27% and that more than 600,000 foreclosures were recorded between 2008 and 2015. The debate over risk premiums is not abstract: behind it lie borrowing capacity, public spending and jobs.
The lessons from the PIGS that France could still apply
The acronym PIGS grouped Portugal, Italy, Greece and Spain during the bond-market storm. Fifteen years on, experts look to that episode for lessons on how to tackle France's difficulties. The most repeated conclusion: the periphery learned the hard way what the core has yet to internalise. The constitutional anchor on debt repayment, approved in Spain at the height of the crisis, is cited as a comparative advantage France does not have.
The other side of the coin: the risk premium only makes sense if German debt remains the beacon. If the German bond stops being the benchmark, the indicator loses much of its meaning.
The forgotten indicator that defined 2012
After dominating hundreds of front pages in 2010 and 2012, the risk premium faded into media oblivion. It only returns when the spread with some neighbour widens. Today it is back because of France. Tomorrow, who knows.
With spreads like these, the temptation to celebrate someone else's weakness is strong. The question is how long the market takes to remember that Spain still borrows more expensively than Germany. On that day, the headline will be a different one.
Spanish debt is holding up. French debt is not. With the French risk premium above 170 basis points and Spain's at 67, the gap between the two neighbours has become the economic story of the week: France carries almost three times the risk the markets assign to Spain. The headline, celebrated as good news in some economic forums, hides a less comfortable reading. Your sick neighbour getting worse doesn't cure you.
What it means for France's risk premium to exceed 170 points
The risk premium measures the extra cost a state pays to borrow compared with the German bond, the benchmark considered risk-free in the eurozone. France paying more than 170 basis points while Spain pays only 67 shows that investors currently see more danger in Paris than in Madrid. France's political and budget crisis explains much of that punishment. The analysts quoted also warn of the risk of contagion to other countries, though they rule out a repeat of the 2011 debt crisis.
The nuance matters. A risk premium of 67 points is no small thing: it remains a serious problem, as it was when Spain was hovering around 640 in 2012. The comparison with France is comforting, but it solves nothing.
Why Spain is not safe even if France is worse off
The lesson of the previous debt crisis is uncomfortable. Greece was in worse shape than Spain, and that did not prevent deep cuts or a severe crisis. Contagion ignores rankings: if the big partner wobbles, credit becomes more expensive for everyone. Spain's premium is also rising, even if from a lower level.
Some recall that during the housing crisis Spain's public debt went from 30% to 100% of GDP, that unemployment neared 27% and that more than 600,000 foreclosures were recorded between 2008 and 2015. The debate over risk premiums is not abstract: behind it lie borrowing capacity, public spending and jobs.
The lessons from the PIGS that France could still apply
The acronym PIGS grouped Portugal, Italy, Greece and Spain during the bond-market storm. Fifteen years on, experts look to that episode for lessons on how to tackle France's difficulties. The most repeated conclusion: the periphery learned the hard way what the core has yet to internalise. The constitutional anchor on debt repayment, approved in Spain at the height of the crisis, is cited as a comparative advantage France does not have.
The other side of the coin: the risk premium only makes sense if German debt remains the beacon. If the German bond stops being the benchmark, the indicator loses much of its meaning.
The forgotten indicator that defined 2012
After dominating hundreds of front pages in 2010 and 2012, the risk premium faded into media oblivion. It only returns when the spread with some neighbour widens. Today it is back because of France. Tomorrow, who knows.
With spreads like these, the temptation to celebrate someone else's weakness is strong. The question is how long the market takes to remember that Spain still borrows more expensively than Germany. On that day, the headline will be a different one.
Also available in: Deutsch
Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (19 replies).
More summaries
-
France now pays more than Greece for its borrowing costs
A post on X claims that markets see Athens as a safer bet than Paris and that France's risk premium now exceeds Greece's.
-
France's Risk Premium Matches Greece Amid Eurozone Debt Crisis
France's risk premium hits 86 basis points, equal to Greece's, while Spain drops to 71. French deficit nears 6% during economic expansion.
-
ECB delays return to 2% inflation target until after 2025
ECB minutes admit the 2% goal won't be forced before 2025 to protect GDP. Rising food costs erode savings' purchasing power.
-
Enerparc's Viral Debt: From $33,000 Million to $33.4 Million
A viral tweet attributed a debt of $33,000 million to the German solar company Enerparc; the actual figure being reported is $33.4 million.
-
Europe registers 400,000 EVs in September, but just three countries drive the growth
Europe topped 400,000 electric cars in September, but Germany, France and the UK account for more than half of sales. Diesel holds its ground in Spain's used car market.
-
The R78 claim in a short video: rabbi's remarks on Islam
David Touitou, a French-Jewish rabbi, claims Islam is 'Israel's broom' to sweep away Christianity, and that his messiah will not return until Christianity disappears.