Euro tumbles to 17-month low on Spain, France turmoil — SkimNews
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- Euro dropped 0.6% against the U.S. dollar on Monday, reaching its weakest point since May 19, 2025, according to LSEG data.
- Pedro Sánchez called a snap Spanish election for November, triggered by protests over the country's housing crisis and highlighting the difficulty of passing reforms in a euro area growth bright spot.
- Rufaro Chiriseri of RBC Wealth Management told CNBC that Spanish assets had been a preferred investment this year due to fiscal stability, noting Spanish and Portuguese debt sold off less aggressively than French and Italian debt last week.
- Barclays economists said France's draft 2027 budget aims to cut the public deficit from 5.4% to 5% of GDP, but the country is unlikely to meet those fiscal targets even if the plan is adopted.
- ING strategists warned the French budget would not resolve structural fiscal problems, with the deficit remaining too high to stabilize the debt ratio as ageing-related and interest expenditures continue rising.
- Barclays noted that French fiscal and political developments cloud the euro area outlook, with no inflection point expected before next year's presidential election.
Why it matters: France's mounting debt servicing costs and failure to meet even modest deficit targets put it at the center of the euro zone's sovereign market strain, with no resolution expected before the 2027 presidential election. Combined with Spain's snap November election and a fragmented bond market, the political calendar now constrains any fiscal fix through 2026. Investors who treated Spain as a safe haven within peripheral Europe are reassessing whether any major euro economy can deliver the reforms needed.
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