The Euro Falls to a 17-Month Low on Spanish and French Politics
The euro fell 0.6% against the dollar on Monday to its weakest since 19 May last year, as rising euro-area inflation, interest rates and borrowing costs met political uncertainty in Spain and France. Pedro Sánchez is widely expected to call a snap Spanish election after losing two housing decrees on Friday, though his office has declined to comment. France’s draft budget aims to cut the deficit from 5.4% of national income to 5%.
Spain is the immediate trigger and the more human story. The decrees fell in the 350-seat lower house on Friday, the Catalan separatists of Junts voting with the People’s Party and Vox against measures that would have halted evictions of vulnerable people, curbed short-term lets and made leases renew indefinitely. They had been drafted after the eviction of María del Carmen Abascal, 87, from the Madrid home she had lived in for seventy years, after an international investment fund bought the building and raised her rent by more than 200%. Saturday brought about 70,000 onto the streets of Madrid on the government’s own count and demonstrations in fifty cities, with rubber bullets and tear gas in Valencia. Mr Sánchez’s term does not expire until the summer of 2027, so an autumn election would be a choice rather than a necessity. France is the slower problem: Barclays economists said French fiscal and political developments “cloud the euro area outlook” and are “unlikely to reach an inflection point before next year’s presidential election”, while ING said the draft budget would “not resolve France’s structural fiscal problems”. For British readers the currency cuts the other way: sterling has been firming against the euro, which makes a European holiday cheaper and British exports to the bloc dearer. Watch whether Mr Sánchez actually dissolves parliament.