So, Macron´s image took a beating as he defended tax cuts and new spending measures as the highly unpopular President had to give in to the Yellow Vests pressure.


Les Echoes reports further:

  • One government official state the budget deficit may be higher than 3.6%, not taking into account public spending cuts being made
  • Cut tax receipts by 4 billion euros
  • The deficit, above the 3% EU limit, is likely to get France in trouble with Brussels
  • French growth likely to be weaker

It wasn´t long ago Macron was bashing the Italian budget saga. Now things have changed dramatically and the slightly naïve perception of Macron taking over Merkel´s role has changed into Macron fighting for his political career.

The Bund/OAT spread (German vs French 10-year yield) has spiked recently and trades at levels not seen since mid-2017. Note the spread blew out, reaching levels around 80, around the May 2017 elections.

Below chart shows the MIB, IBEX, CAC 40 and Eurostoxx 50 performance YTD. Out of these 4 indices, CAC 40 is the best seen since the start of this year.

The same chart as above over the past month paints a slightly different picture. MIB as the top relative performer and CAC 40 as the relative under performer.

France is not Italy, yet, but should be a space closely watched as Macrons popularity continues going one way. Below image shows Macron´s popularity as an average (calculated by Bloomberg), starting from May 2017 to present rating of 23%.

Add France to the European problems list for the future, but for now, let´s enjoy the continuation of the bounce.

Source; charts by Bloomberg