The euro has hit a 17-month low against the US dollar due to heightened investor concerns over France’s increasing debt and political instability across the eurozone. On Monday, the euro dropped approximately 0.8% to fall below $1.12, marking its weakest position since May 2025. This decline follows a broader trend, with the euro losing around 1.2% this month and slipping by about eight cents from its January peak of $1.20.
France’s financial situation is at the forefront of these concerns, as the country faces rising borrowing costs and challenges in reducing its budget deficit. The yield on French 10-year government bonds recently surged to its highest level since 2002, and the spread between French and German government bond yields has reached its widest margin since 2012. In an effort to address these issues, the French government has proposed a €54 billion savings plan, aiming to decrease the budget deficit from 5.5% of GDP this year to 5% next year. However, the government’s minority status and opposition to spending cuts have cast doubt on the feasibility of these financial reforms.
Further contributing to the euro’s decline is the political uncertainty in the eurozone, exacerbated by Spain’s announcement of an early general election. Analysts caution that the combination of political instability in France and Spain, along with concerns about sovereign debt, could continue to exert downward pressure on the euro and elevate risks for the broader currency bloc.
