French country risk rises as Le Pen lays out Frexit plans
A measure of France's country risk widened noticeably after French far-right presidential hopeful Marine Le Pen laid out her plans for a referendum on EU membership at the weekend, although some analysts sounded a confident note that scenario could be avoided.
On Sunday, Le Pen held a rally for over 5,000 people in the southern French city of Lyons, calling for the euro area's second largest economy to pull out of the single currency, a tax on foreign workers, trade barriers or what she dubbed "intelligent protectionism", re-industrialisation and a halt to "uncontrolled" immigration.
Above all, the EU, Le Pen claimed, had failed to live up to its promises in terms of prosperity and security.
She also laid out plans for a referendum on France's continued membership of the EU.
Under her proposals, the number of migrants allowed into France each year would be capped at just 10,000, 80% less than at present.
Her policy proposals sent yields on French and German 10-year government debt in opposite directions and saw the differential, which many analysts consider to be a key barometre of the riskiness of the country's debt, blow out to 73 basis points - its widest since at least March 2013.
As of 1520 GMT the yield on the benchmark 10-year French sovereign bond was higher by four basis points to 1.12% and that on Bunds of similar maturity off by two basis points to 0.39%.
In parallel, the news-flow over the weekend appeared to indicate that some observers had begun to pin their hopes of keeping the far-right National Front leader out of the Elysee on the centrist presidential candidate Emmanuel Macron, especially as a scandal continued to engulf rival centre-right candidate Francois Fillon.
Fillon was under pressure following accusations that his wife and two of his children were paid €900,000 for work they did not actually do.
That led economists at Barclays Research to describe the coming week for Fillon's Les Républicains party as "crucial" as it might be left headless and in disarray just two months before the elections and with no obvious substitute for him in sight.
The results of the latest poll, from Opinionway, put Le Pen in the lead after the first round of the elections on 23 April, followed by 23% support for former economy minister Macron and 20% backing for Fillon.
However, a second round due to be held on 7 May was expected to result in Macron making off with 65% of the vote against 35% for Le Pen, Market News International reported.
"There is no right wing and no left wing anymore. There are only those who support globalisation and patriots," Le Pen told her supporters.
The far right leader framed the debate as a choice between two "totalitarianisms", that of economic globalisation and Islamic fundamentalism.
At the weekend, she also unveiled 144 presidential commitments, including on the environment, which one commentator said were meant to broaden the party's appeal before the elections.
On a more hopeful note for the EU, Alberto Gallo at Algebris Investments said: "There is still a potentially positive outcome for European politics. Yes, populist candidates Geert Wilders in the Netherlands and Le Pen in France have gained ground, but they remain head-to-head with others. In France, both Emmanuel Macron and François Fillon support domestic reforms and want more, not less European integration.
"[...] While Le Pen may continue to rise in the polls against Fillon if the latter’s scandal worsens, it seems increasingly likely that the battle will be between Le Pen and Macron. This is positive as Macron has been enjoying a significant and growing lead over Le Pen in polls."