Political turmoil in France causes euro to plummet and borrowing costs to soar as manufacturing crisis deepens

French borrowing costs soared and the euro fell yesterday as the Paris government teetered on the brink of collapse and grim figures revealed a new slowdown for Europe’s manufacturing sector.

The market turbulence came as parties on the right and left said they would back a no-confidence motion against Prime Minister Michel Barnier in the coming days.

Barnier made a dramatic appeal to French parliamentarians urging them not to back the measure, which would be the first time a French government has been brought down by a vote of no confidence since 1962.

“We are at the moment of truth,” he said. “The French will not forgive us for putting the interests of individuals before the future of the country.”

Yields on French 10-year bonds – the yield required by investors to lend to the government – ​​soared, briefly surpassing those issued by Greece.

The narrowing gap between the two countries’ borrowing costs illustrates how, while Greece has recovered from its chaotic debt crisis more than a decade ago, France – Europe’s second-largest economy – has sunk into the mire. .

At the same time, the gap between French bonds and those issued by Germany has increased.

That ‘spread’ – an indicator of the premium charged by investors for holding French debt – widened to 0.9 percentage points last week, the highest since 2012, and yesterday it rose again close to that level.

Meanwhile, the euro fell below $1.05 against the US dollar, approaching a two-year low.

Sterling rose by around €1.21 against the euro, in a boost for British travelers heading to the continent over Christmas.

France has been plunged into political turmoil after snap elections earlier this year that failed to give any bloc a parliamentary majority.

This has left Barnier struggling to pass a budget bill setting out £50bn worth of tax rises and spending cuts as he seeks to repair the country’s debt-laden public finances.

The lack of support prompted the prime minister to say he would pass the bill without a vote.

That led National Rally leader Marine Le Pen to say she would table a no-confidence motion and left-wing parties were expected to do the same.

It came as the closely watched Purchasing Managers’ Index (PMI) showed the slowdown in the eurozone manufacturing sector deepened last month.

The PMI index produced by S&P Global and Hamburg Commercial Bank sank

from 46 in October to 45.2 in November, a measure in which the 50 mark separates growth from contraction.