Monday\u2019s announcement of a snap election in Spain<\/a> by the socialist prime minister, Pedro S\u00e1nchez, after rightwing parties torpedoed emergency housing legislation last week has also fuelled eurozone uncertainty. Madrid\u2019s benchmark Ibex 35 index rose by 0.5%.<\/p>\n \u201cEurope is taking the spotlight at the start of the week, as fiscal and political concerns hit the bloc,\u201d said Kathleen Brooks, the research director at XTB. \u201cFrance is the epicentre of the concerns; however, Spain is also set to get ready for an early election, which is adding to investor worries.\u201d<\/p>\n Amid a global sell-off in sovereign debt as the Iran war rattles markets, the yield \u2013 in effect the interest rate \u2013 on French 10-year government bonds last week hit the highest level since 2002, before dipping back on Friday.<\/p>\n This pushed the gap between France and Germany\u2019s borrowing costs, an important measure of investor concern, to its widest level since 2012 at the height of the eurozone sovereign debt crisis<\/a>.<\/p>\n Investors are focused on Paris\u2019s fiscal position and concerns that the presidential election and a hung parliament \u2013 with Marine Le Pen\u2019s far-right National Rally party gaining ground<\/a> \u2013 could make it tougher for the government to curtail a yawning budget deficit.<\/p>\n The minority government of the French prime minister, S\u00e9bastien Lecornu, announced plans last month for a \u20ac54bn (\u00a345.8bn) savings drive to curb borrowing levels, setting the stage for a fierce political battle.<\/p>\n With President Emmanuel Macron\u2019s centrist administration under pressure amid strikes and protests across the country<\/a>, the budget measures involve cutting pensions spending and funding for government departments, excluding defence.<\/p>\n Lecornu said the savings would result in limiting a budget deficit of 5.5% of GDP this year to 5% next year. He warned that without action the shortfall between public spending and revenue could reach 6.5%.<\/p>\n
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