The euro has plunged to its lowest level against the US dollar in 17 months, as investor anxiety mounts over France’s increasing debt and broader political uncertainties within the eurozone. On Monday, the euro fell approximately 0.8% to below $1.12, marking its weakest point since May 2025. This decline continues a downward trend, with the euro losing about 1.2% this month and a total of eight cents since its January peak of $1.20.
Investor concerns are largely centered around France’s escalating borrowing costs and the government’s efforts to curb its budget deficit. French 10-year government bond yields have climbed to their highest since 2002, while the yield spread between French and German bonds has reached levels not seen since 2012.
The French government, operating under a minority administration, has proposed a €54 billion savings plan aimed at reducing the budget deficit from 5.5% of GDP this year to 5% next year. However, political resistance and public opposition to the proposed spending cuts have cast doubt on the plan’s feasibility, raising concerns about France’s ability to manage its fiscal challenges effectively.
Compounding these concerns is the recent political turbulence in Spain, where an early general election has been called. Analysts warn that political instability in both France and Spain, combined with sovereign debt worries, could exert additional pressure on the euro and elevate risks across the eurozone.
