Today at 13:06 Mario Monti had not yet appeared in front of journalists to announce the list of ministers of his government. At that precise moment in Paris, the spread between ten-year Oats (the equivalent of our BTPs) and Bunds broke yet another negative record of these days: 196,2 basis points. Yes, the highest Oat-Bund spread since the introduction of the euro. Not only that: since 1989. At 13:30, on the other hand, six minutes had passed since the Italian neo-premier had unveiled his list, words followed with extreme attention in the market halls in Paris. At that moment, the French spread returned below the 190 bps threshold. And it kept going down: around 17pm we were at 188.
French banks are the most exposed in Europe to Italian bonds (twice as many as German ones), even if they have sold them like crazy in recent weeks. And, if the Italian situation were to really precipitate and the State-saving Fund were to intervene massively to support it, this would have direct repercussions on the public finances of Paris, which, immediately after Berlin, is the Fund's major guarantor. In short, Italy is one of France's main problems. And one of the reasons for the tensions on French government bonds. But that's not her only problem. The race of the Oat-Bund spread, which accelerated yesterday, stopped today after the announcement of Monti's list. But that gap remains large, very large, if we consider that for a long time it remained almost zero. And that, at the beginning of June, when it had jumped to 30 bp, the alarm was already sounding in Paris.
In fact, France's problems are other as well. Those of a real economy that is struggling. And a public deficit which at the end of the year should still amount to 5,8% of GDP (3,7% estimated for Italy). Nicolas Sarkozy has promised to return below 3% in 2013. And to this end he has launched two "maneuvers", one at the end of August and the other in recent days. But the European Commission has already made it known that France will not make it, that a new package of cuts will be needed: more tears and blood. The fate of the triple A rating, which France finds itself recognized by the main rating agencies for sovereign debt, also depends on the stability of French public finances (and not only on the eventual collapse of Italy). Can a country with the spread at current levels keep that vote?
There are many doubts about this. They also emerged in Paris, where a popular economist like Jacques Attali said: “Let's not delude ourselves, France has already lost its triple A on the markets”. Today, however, there are official and unofficial reactions to the level of the spread. Almost pickled. “It is absolutely unjustified – declared Valérie Pécresse, Minister of the Budget -. The latest maneuver of 7 November and the commitments we have made on the deficit and debt make our economic strategy absolutely credible”. According to Cyril Régnat, economist at Natixis, "the current rates at which our public debt is financed are still acceptable". At around 17pm, the 3,688-year Oat yield was 3,78. We are still below this year's record, 8%, reached on XNUMX April. Régnat doesn't even worry about the possible (probable for many) downgrade of France, the forced abandonment of the triple A. “Our debt would still remain of good quality compared to Italy. And to other European countries”.
