FLASH
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For many investors, Giorgia Meloni's Italy seems more credible than Emmanuel Macron's France. This is not the claim of some Fratelli d'Italia activist or a supporter of the prime minister's actions, but of a well-known French newspaper: Le Monde.
"Italy can teach France a lesson"
In three years, “Rome has significantly reduced its public deficit, while Paris has let its spiral spiral out of control,” writes the French newspaper. Precisely for this reason, “France risks getting into more expensive debts than Italy.” According to independent economist Philippe Crevel, our country now has “the capacity to teach France a lesson.”
According to Le Monde, one figure sums up the current inversion: the interest rates that investors are demanding to hold the government debt of both countries. "In 2011 and 2012, Italy was considered so undisciplined and unreliable that investors demanded up to 400 basis points (4 percent) above the French rate: when France paid 3 percent per year, Italy had to pay 7 percent."
However, things have changed since then. On August 15, the interest rate fell to less than 5 basis points for the main reference, with a 10-year maturity. "A result unseen since 2005. For 5-year bonds, the gap between French and Italian debt on financial markets has completely disappeared since mid-July," notes the French newspaper.
Political stability
France is not currently paying more to borrow: “It could be just a matter of days or weeks,” believes economist Andrew Kenningham, predicting that Paris’ borrowing costs could soon exceed those of Rome. But why is this reversal happening? There are several possible explanations.
One of these concerns political stability. Since 2022, Italy has been led by Meloni, who is seeking re-election to Palazzo Chigi in the 2027 general election. Meanwhile, France has experienced ongoing parliamentary and governmental instability. It is worth remembering that since 2020, Italy has had three prime ministers, while France has had six different prime ministers. Meloni aims to complete her term without a change in government, while French Prime Minister François Bayrou could be ousted at any moment.
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