IMF Managing Director Kristalina Georgieva issued a stark warning to France to bring its public finances under control. French 10-year bond yields have risen by more than 100 basis points since the start of the year, now exceeding those of Italian bonds. France’s deficit reached 5.1% of GDP last year, while the European Union recommends a level closer to 3%. The French government must convince a politically divided parliament to approve tens of billions of euros in spending cuts. Georgieva acknowledged the fiscal adjustment will be tough, but emphasized that bond markets respond to economic fundamentals and that governments must send clear signals of debt containment.
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