The euro’s value plummeted to its lowest against the US dollar in 17 months, driven by growing anxieties over France’s increasing debt and the wider political instability in the eurozone. On Monday, the euro slipped approximately 0.8% to dip below $1.12, marking its weakest point since May 2025. This decline contributes to a broader 1.2% drop in April, extending from a January high of $1.20.
Investor concerns are particularly centered on the rising costs of French borrowing and the challenges facing the government as it attempts to curb the budget deficit. The yield on French 10-year government bonds has surged to the highest level since 2002. Meanwhile, the spread between French and German borrowing costs has widened to its greatest extent since 2012, reflecting apprehensions about France’s fiscal health.
In response, France’s minority government has put forward a savings plan worth €54 billion aimed at reducing the budget deficit from 5.5% of GDP this year to 5% next year. However, the political climate, marked by opposition to spending cuts, has fueled doubts over the feasibility of these fiscal measures.
Adding to the uncertainty is Spain’s recent decision to call an early general election, further contributing to the region’s political instability. Analysts have cautioned that the combination of political unrest in both France and Spain, coupled with sovereign debt worries, could exert additional pressure on the euro and raise broader economic risks across the eurozone.
