Euro Hits 17-Month Low as French Debt Fears Grow

The euro has dropped to its lowest level in 17 months against the dollar, amid growing concerns over France’s economic stability. The single currency fell by 0.9% on Monday to $1.116, marking its weakest point since May 2025. This decline follows four consecutive weeks of losses against the dollar, driven by worries about France’s high debt levels and political uncertainty ahead of the 2027 presidential election.

French Prime Minister Sébastien Lecornu is aiming to cut €54 billion in public spending to reduce the deficit, but faces strong opposition from politicians vying to succeed Emmanuel Macron. Marine Le Pen, the frontrunner from the hard-Right National Rally, has raised doubts about her commitment to spending cuts, suggesting any deficit restraints would require a referendum. Analysts, such as Matt Cairns of Rabobank, express skepticism about the political will to address France’s fiscal challenges.

The financial strain is evident in rising borrowing costs, with 10-year government bond yields nearing 5%, a level not seen since 2002. The gap between French and German borrowing rates has widened to its highest since the 2012 eurozone crisis. Hauke Siemssen of Commerzbank warns that the bond market dynamics are increasingly concerning, while Jim Reid of Deutsche Bank questions whether this signals the start of a new euro sovereign crisis.

Adding to the eurozone’s uncertainty, Spanish Prime Minister Pedro Sanchez has called an early election for November 29 after his parliament rejected measures to address Spain’s housing crisis. The euro also dropped 0.5% against the pound, hitting its lowest point since July.