The euro has tumbled to its lowest value against the US dollar in 17 months, driven by mounting concerns over France’s escalating debt and political instability across the eurozone. On Monday, the euro fell approximately 0.8% to below $1.12, marking its weakest position since May 2025.
Investors are increasingly worried about France’s rising borrowing costs and the government’s efforts to manage its budget deficit. Recently, the yield on French 10-year government bonds reached its highest level since 2002. Additionally, the yield spread between French and German bonds has widened to its largest gap since 2012.
In an effort to address the budget deficit, France’s minority government has proposed a €54 billion savings plan. This initiative aims to reduce the deficit from 5.5% of GDP this year to 5% next year. However, political opposition to spending cuts is raising doubts about the feasibility of these measures.
The situation is further complicated by Spain’s announcement of an early general election, contributing to political uncertainty in the region. Analysts caution that the combination of political instability in France and Spain, alongside sovereign debt concerns, could exert additional pressure on the euro and elevate risks within the broader currency bloc.