France’s President Nicolas Sarkozy: worried? | business | Hindustan Times
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France’s President Nicolas Sarkozy: worried?

business Updated: Nov 16, 2011 22:05 IST

Borrowing costs for European governments jumped across the board on Tuesday, and new data confirmed that the region’s economy is slowing. That provided evidence on two key fronts that leaders of the euro area have yet to contain its stubborn financial crisis.

The rise in interest rates hit Spain, Italy and, perhaps most worrying, France. French borrowing costs outstripped German costs, which serve as a regional benchmark, by the most since the adoption of the euro more than a decade ago.

France, the euro zone’s second-largest economy, retains AAA bond rating and is able to borrow at rates substantially below those for Spain, Italy and other economically weaker countries. But the widening of the interest rate spread between French and German bonds is a significant sign that investors may no longer view France as a safe haven.

The emergency plans that European leaders recently developed in response to the debt crisis hinge on France keeping a strong credit rating. Any hint that France might lose that status could intensify the region’s crisis and leave Germany as the sole, large underwriter of any rescue effort.

“Clearly there is a market deterioration in Europe over all,” said Tito Boeri, an economist at Bocconi University. “They are testing France, too.”

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