UBS On-Air: Market Moves Across the Pond: Political gridlock at the heart of Europe
Sep 16, 2025
Claudia Panseri, Chief Investment Officer for France, and Dean Turner, the CIO's European economist, delve into the turbulence of France's political scene, highlighting the impact on investor confidence. They discuss France's ongoing debt challenges and the complex interplay of political instability and economic recovery. The duo suggests that despite concerns, there are strategic investment opportunities in Europe, particularly with the potential rise of the euro, and they emphasize the importance of diversifying investments for US investors.
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Repeated Government Turnover
- France has had five prime ministers since the 2022 general election and the National Assembly is highly fragmented.
- Sébastien Lecornu must form a new government and secure support to pass the 2026 budget.
High Spending Drives Persistent Deficit
- France's deficit has stayed above 5% for a long time and debt has risen because government spending exceeds 50% of GDP.
- Debt servicing remains affordable today but rising rates and spreads increase future pressures.
Prefer Shorter-Dated French Bonds
- Favor short- to medium-term French government bonds rather than long-dated paper due to yield pressure.
- We like two- to five-year French brackets where risk is already partly priced in.