The euro has tumbled to its lowest point against the US dollar in 17 months, driven by investor concerns over France’s escalating debt and political uncertainty within the eurozone. On Monday, the single currency fell approximately 0.8% to dip below $1.12, marking its weakest level since May 2025. This decline follows the euro’s overall 1.2% drop this month, after falling from a January peak of $1.20.
Investor unease centers around France’s rising borrowing costs and the government’s ability to manage its budget deficit. Recently, French 10-year government bond yields reached their highest levels since 2002. Additionally, the yield gap between French and German bonds has widened to its largest since 2012, signaling increased financial strain.
In response to these challenges, France’s minority government has put forward a €54 billion savings plan aimed at trimming the budget deficit from 5.5% of GDP this year to 5% next year. However, the proposal has met with political pressure and resistance to spending cuts, casting doubt on the feasibility of effectively controlling public finances.
Further complicating the region’s economic landscape is Spain’s decision to hold an early general election, which has heightened political uncertainty. Analysts caution that the combined political instability in France and Spain, alongside concerns about sovereign debt, could exacerbate pressure on the euro and elevate risks throughout the broader currency bloc.
