After several rough sessions, French government debt caught a bid on Tuesday, joining a wider lift in European sovereigns. The premium investors demand to hold France over Germany on 10-year bonds narrowed to roughly 127 basis points from a recent high close to 160. The bounce followed a selloff fueled by doubts that a minority government can deliver both spending cuts and tax hikes, with the fiscal path aiming for a deficit of 5% of output in the coming year, compared with 5.4% in 2026.
Speaking on France Inter radio, Emmanuel Moulin, who also sits on the ECB Governing Council, said the picture is "complicated and serious," but he drew a bright line around Frankfurt's role. "The ECB is not there to deal with the fiscal problems of countries - it is there to fight inflation and have inflation around 2%," he said. "So the conditions are not met today for an intervention from the ECB." He added that France can act at home by "voting a budget and committing to not having a deficit above 5%."
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With presidential elections scheduled in May, investors are taking a harder look at France's longer run debt path, and the central bank has been pulled into the campaign. Far-left leader Jean-Luc Mélenchon has put forward cancelling or freezing debts held by the ECB and the Bank of France, a proposal dominating early economic discussions. Marine Le Pen, the far-right figure leading the polls, has argued the ECB should step in to ease the interest burden.
Last month, the Bank of France unusually issued a statement denying it had sold debt holdings after criticism from Mélenchon's party. The clash escalated when Mélenchon, via a post on X, said he would seek treason charges against Moulin if he wins in 2027, asserting that Moulin had encouraged speculation against France. On Wednesday, Moulin stated he would not step down even if Mélenchon were elected. Drawing a comparison, he added, "Until now, I only knew of one country where people tried to intimidate a central banker, and that's Trump's America with Jerome Powell," before concluding, "I refuse to be intimidated. I will continue to say what I think within the framework of my mandate, and to defend the institution that I preside."
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