France could be the next euro zone economy to fall in the European debt crisis which has so far seen both Greece and Ireland take a bailout, London Stock Exchange chief executive Xavier Rolet said, but analysts dismissed the claim.
“It won’t be long before bond investors turn to France after they have finished with Portugal and Spain,” Rolet said over the weekend. “The country’s deficit is much, much higher than anyone realizes. No one, not even France, can hide any more.”
But Francois Mallet, head of equity at Kepler Capital Markets said there was no cause for serious concern over France’s budget deficit.
“I do not believe that there should be major concern about the French situation as budget deficit is already lower than most other European partners, " he told CNBC.
France has a budget deficit of 7.5 percent, well below a deficit of more than 11 percent for Greece, Ireland and Spain, and French debt is at 78 percent of GDP.
That compares with 115 percent for Greece and 73 percent for Germany, Mallet said.
Mallet said any weakness in French bonds would raise serious questions about the euro.
“I believe that it would automatically mean that the size of the European bailout facility would be increased substantially so that it would stop any speculation on French bonds,” he said.
Pierre-Yves Gauthier, Founding Partner at AlphaValue said he did not think market claims of a euro break-up would eventually turn into a self-fulfilling prophecy.
“Short sellers send strong and useful budgetary messages but it is worth noting that the euro/dollar has remained quite serene in the meantime,” he said.
But with European leaders divided over how to tackle the euro zone debt crisis and and German opposition to an increase in the bailout fund, markets are likely to remain on edge.
source:cnbc.com
