France bond yields do not need ECB help, official says

Bank of France Governor Emmanuel Moulin said on Friday that rising French government bond yields do not justify emergency help from the European Central Bank.

Moulin said the conditions for ECB intervention to push down French yields “are not met”. He said ECB tools can be used when disorderly and unjustified market moves disrupt monetary policy transmission, but only under strict conditions.

“We are not seeing any financial fragmentation in the eurozone,” he said during the IMF and World Bank annual meetings in Bangkok.

France's benchmark 10-year bond yield is near five percent, a level not seen since 2002, after weeks of selling linked to concerns about the country's debt and budget outlook.

Doubts about France's ability to control spending have grown as lawmakers debate a 2027 budget plan that includes spending cuts but would still leave government debt at about 120 percent of GDP, double the EU limit of 60 percent.

Moulin said the rise in France's debt interest costs was mainly linked to uncertainty over the budget vote. He said French banks and insurance companies were solid and could withstand higher yields because of high capital and reserves.

He said the issue could be addressed through budget consolidation, using a combination of tax increases and spending cuts, but added that it was not for the Bank of France or the ECB to tell lawmakers what to do.