France risk and ”reverse contagion”

It is difficult to know how radical (or reckless) France’s next government will be on fiscal policy, but the risks to France’s public finances have certainly risen since the snap election was called. Meanwhile, although there has been an increase in spreads on bonds of other euro-zone governments, for now the risks of a systemic problem seem low. Next week we will look out for manifestos of the French political parties and expect the EC to name Italy and France among the countries in the excessive deficit procedure.