The euro has reached its lowest value against the US dollar in 17 months due to escalating concerns over France’s rising debt and political challenges within the eurozone. On Monday, the euro dropped approximately 0.8% to fall below $1.12, marking its weakest performance since May 2025. This decline follows a broader trend, with the euro losing about 1.2% this month, having fallen roughly eight cents from its January peak of $1.20.
Investors are particularly worried about France’s increasing borrowing costs and the government’s attempts to address its budget deficit. Notably, French 10-year government bond yields have surged to their highest level since 2002. Additionally, the disparity between French and German borrowing costs has widened to its greatest extent since 2012, reflecting heightened market anxiety.
In response, France’s minority government has proposed a €54 billion savings initiative aimed at reducing the budget deficit from 5.5% of GDP this year to 5% next year. However, this plan faces significant political opposition, with concerns mounting that efforts to stabilize public finances could encounter substantial obstacles.
Adding to the eurozone’s political uncertainty, Spain’s decision to hold an early general election has further fueled investor anxiety. Analysts caution that the combination of political instability in France and Spain, along with sovereign debt concerns, could exert additional pressure on the euro and elevate risks across the broader currency bloc.