Greek sovereign bonds have made history by closing their yield gap against French bonds, indicating Greece’s fiscal reforms and economic resilience. This achievement comes after a stark contrast when Greek bonds once yielded nearly 40 percentage points more than French bonds during the eurozone debt crisis. Now, Greece’s 10-year sovereign bonds yield below 3%, aligning with France’s OAT bonds, showing a remarkable turnaround for the country.
Greece’s success is attributed to fiscal discipline, economic reforms, and resilience against high interest rates. The country’s primary budget surplus is expected to exceed targets this year, with a positive outlook for its banking sector, marked by buy ratings for major players like Eurobank, Piraeus, and Alpha Bank. Analysts believe that Greece’s economic growth and fiscal health are driving its bond market performance.
On the other hand, French bonds are facing pressure due to political uncertainty, rising deficits, and structural economic challenges. The yield on French OATs has reached 2.945%, reflecting fiscal challenges and political stalemates that could hinder reforms. France’s debt-to-GDP ratio is projected to rise, highlighting the country’s struggle to address structural issues like ageing demographics and stalling productivity.
The contrasting trajectories of Greece and France underscore deeper structural shifts within the eurozone. While Greece is projected to continue as one of Europe’s most dynamic economies, France’s growth is expected to slow, emphasizing the challenges facing the second-largest economy in the eurozone. The differing fiscal trajectories of the two countries reflect ongoing fiscal consolidation in Greece and a steady rise in public debt for France.
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