French political system faces rare defeat - first time in over 60 years
French government lost power after no-confidence vote making history since early 1960s. Financial markets show mixed response while experts warn about future economic challenges
The french government experienced a rare defeat when it lost a no-confidence vote (first time since the early-60s)‚ causing a major shake-up in euro-zones second-biggest economy
Markets showed a mixed-up reaction: the euro stayed near $1.0517‚ while french stocks didnt move much. However bond markets showed some stress - the french-german bond difference hit its highest point since the debt problems about 12 years ago reaching 90 basis-points
The paralysis will stay as main feature of French politics for next two years‚ which means debt problems wont be fixed
Expert opinions point to several key-points about this situation:
- Market players dont expect quick solutions
- Spanish bonds look more attractive now
- Credit rating might get worse
- Political problems will stay until next summer
James Athey from Marlborough suggests that this wasnt unexpected but markets need more clarity which wont come until mid-next year. Meanwhile Nick Rees (senior analyst at Monex Europe) thinks euro should be trading lower: “Im amazed the euro hasnt moved much - the french government has collapsed“
