France Sees Wider Spreads Costing €800 Million After a Year
(Bloomberg) -- France’s Finance Ministry estimates the selloff in the country’s debt after President Emmanuel Macron called snap legislative elections would cost the state around an additional €800 million ($859 million) if the higher price of borrowing persisted for a year.
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The calculation is based on an increase in the premium of France’s borrowing costs over Germany’s of between 25 basis points and 30 basis points since the election was called on June 9.
After five years, the additional cost would be around €4 billion to €5 billion a year, and as much as €9 billion to €10 billion if it continued for 10 years, according to Finance Ministry officials.
Still, the calculation is theoretical as it presumes stability in the increase relative to Germany over the different time horizons. If the spread were to quickly return to levels seen before the election announcement, the impact would be much smaller, the officials said.
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