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Investing.com - France’s government borrowing costs will likely rise above Italy’s in the near future, according to a new analysis from Capital Economics released Monday.
The economic research firm noted this prediction may appear counterintuitive given Italy’s higher debt burden and lower trend growth rate compared to France. Capital Economics attributed its forecast to France’s deteriorating debt dynamics and less stable political environment.
Government borrowing costs have historically been much higher for Italy than France since the global financial crisis. The yield on Italy’s ten-year government bonds has averaged nearly 1.5 percentage points higher than France’s since 2010, according to data cited in the report.
The spread between French and Italian government bond yields has narrowed significantly in recent periods. Capital Economics highlighted that the difference has reached just 18 basis points, its lowest level since 2007.
The convergence of borrowing costs between the two major eurozone economies marks a significant shift in how financial markets are assessing the relative fiscal risks of these nations, despite their different economic profiles.
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