For the first time, borrowing costs in France have reached the same level as those in Greece amidst the country's political turmoil.

• On Thursday, French borrowing costs reached the same level as Greece's for the first time, indicating that France's political crisis is affecting financial markets.
• Earlier Thursday, the spread between French and Greek 10-year government bond yields was reduced to zero, with the French yield at 3.0010% and the Greek yield at 3.030%.

For the first time on record, France's borrowing costs have reached the same level as Greece's, indicating that the country's political crisis is spreading into financial markets.

Earlier Thursday, the spread between French and Greek 10-year government bond yields was reduced to zero, with the French yield at 3.0010% and the Greek yield at 3.030%.

The fact that investors are demanding the same interest rate for holding French debt as they would for holding debt from Greece, a peripheral and debt-ridden economy, highlights the level of concern over political instability in France. Despite the efforts of Prime Minister Michel Barnier to secure support for the 2025 budget, which aims to reduce spending and increase taxes to address France's growing budget deficit, these measures have not been enough to reassure investors.

The New Popular Front alliance on the left has stated that they will present a vote of no confidence in the government if Barnier attempts to impose the budget, which includes 60 billion euros ($63.3 billion) in tax increases and spending reductions.

The far-right National Rally has threatened to back the left in the no-confidence vote, potentially leading to the government's collapse and increased political and economic instability in France.

The next elections cannot be held until June, a year after the last parliamentary elections where the far-left and far-right did well in the first and second round of the vote but failed to win a majority of seats. As a result, President Emmanuel Macron appointed conservative Barnier to lead a minority government after the election.

On Thursday, French officials attempted to safeguard the economy, but were concerned about the growing perception of French debt as risky as Greek debt among bond investors. Economy Minister Antoine Armand stated that the French economy was not comparable to Greece's on the same day.

According to Armand, France is distinct from Greece because it has a superior economy, employment situation, economic activity, and attractiveness. He made this statement on French broadcaster BFM TV, where his comments were translated by Google. Additionally, Armand commended Greece and other peripheral European economies for their efforts in saving money.

According to Jason Da Silva, director of Global Investment Strategy at Arbuthnot, political upheaval in France was likely to create waves in European investing. However, he believed it could motivate French lawmakers to take action.

To spur on more impetus from European political leaders to consider the growth prospects, it may be necessary to endure some market pain, as [potential trade] tariffs loom, according to the speaker on CNBC's Street Signs on Thursday.

If Marine le Pen supports a no confidence vote against Barnier, he could lose his position as leader of the European Commission.

Since 2016, the spread between the 10-year yields of Greece and France has been gradually declining, despite reaching over 30 basis points during the Greek debt crisis in 2012.

Greece recovering

France's economy is facing a budget deficit of 6.1% in 2024 and its public debt has already exceeded 110% of GDP in 2023, which is a violation of the EU's rules for budget deficits and public debt.

In the aftermath of the global financial crisis in the late 2000s, Greece faced the largest sovereign debt crisis in the euro zone, leading to international bailouts and the implementation of austerity measures and reforms. Despite these challenges, Greece has made significant progress in reviving its economy and reducing its debt.

The European Commission predicts that Greece will experience a growth rate of 2.1% in 2024. Despite this, the country's public debt-to-GDP ratio is expected to reach 153.1% in 2024 before gradually decreasing to 146.8% in 2025 and 142.7% in 2026.

The decline is due to primary surpluses, nominal growth, and the reduction of cash buffers in 2024, according to the statement.