Political upheaval in Paris is prompting the financial vulnerabilities of the Eurozone’s second-biggest economy to be reappraised, investors have warned. Many fear that the prospect of dysfunctional politics, flagging growth and a steadily rising debt burden may dent France’s long-term attractiveness to foreign investors who hold around half the country’s government debt.
While this gives it a more diversified investor base than some, it also leaves it more vulnerable to a sharp change in sentiment, say analysts. Half of French government debt is held by non-residents, compared with about 27 per cent in Italy and 43 per cent in Spain, according to Eurostat data. While Italian households hold 11 per cent of the country’s debt, that figure for France is 0.1 per cent.