PoundSterlingLIVE - Above: France's Prime Minister Michel Barnier Monday used an executive power to force through a social security budget bill without a vote in parliament, exposing his government to a no-confidence challenge from the opposition. "It is now up to you... to decide if our country should have a financial law that is responsible, indispensable and useful for our fellow French citizens, or if we are to enter into unchartered territory," Barnier said. Source: France 24.
Pound Sterling trades near 2024 highs against the Euro as market attention turns to French political instability.
The shaky coalition government headed by Michel Barnier faces a no-confidence vote on Wednesday, which could bring it down and inject fresh instability into Europe's second-largest economy.
The Euro was under pressure amidst rising French government bond yields after Barnier said his country faces "a moment of truth"
The Pound to Euro exchange rate rose to a high of 1.2090 on Monday and is at 1.2060 on Tuesday; the 2024 high is at 1.2103, reached on November 11.
Marine Le Pen's National Rally (RN) party filed a motion of no confidence in the government on Monday, alongside a bloc of leftist parties.
If the left and RN joined forces, Barnier's government wouldn't be able to survive a no-confidence vote.
The move comes after Barnier failed to secure RN's support to get his budget through parliament, which prompted him to utilise a piece of legislature to force the budget through without a vote.
This drew the ire of RN and the leftist bloc. Barnier told lawmakers that bringing the government down would trigger a "storm" in financial markets.
France's debt is spiralling and is expected to reach 7% of GDP next year, well above what the EU allows.
French debt costs have shot higher as investors seek extra compensation for holding it.
France's political uncertainty and burgeoning debt is a defnite headwind for the Euro, but it is worth noting that the crisis is contained to France and does not impact other nations.
This is no Eurozone debt crisis, such as that of the early 2010's, and as long as that remains the case, the Euro will likely avoid a major collapse in value.
An original version of this article can be viewed at Pound Sterling Live