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SPAIN

France-Germany rate gap at eurozone record

The gaps between the German borrowing rate and French and Spanish rates widened sharply to record amounts on Tuesday, in a new sign of acute tension at the heart of the eurozone.

The 10-year borrowing rate for France surged to 3.50 percent and for Spain to about 6.30 percent.

The latest ratcheting of tension reflects highly nervous investor sentiment despite progress in Italy and Greece towards new drives to reform public finance and the economies under new governments.

Spain is locked in a general election campaign expected to lead to a landslide against the governing Socialists.

The critically important gap between the rates paid by Germany and France, the two pit props holding up the eurozone, widened to 172.6 basis points or 1.726 percentage points, above the previous record of 170.2 basis points reached last week.

The French borrowing rate rose sharply to 3.500 percent and the German rate fell to 1.775 percent, meaning that France has to pay about twice as much as Germany to borrow.

The French rate had closed at 3.424 percent on Monday. The German rate had ended at 1.781 percent.

This is a closely watched indicator of convergence — or in this case divergence — in confidence regarding the German and French economies, and in political ability to control public finances in weaker countries.

Each rise of one percentage point in the cost of issuing new debt, or refinancing maturing debt, if sustained, adds huge amounts to the annual cost to taxpayers of funding borrowing.

Both Germany and France have the top AAA credit rating, but France now has to pay about twice the rate Germany pays to borrow money for 10 years.

The French government has said it will do everything necessary to retain its AAA rating which is widely considered to be at risk.

The EFSF rescue fund mechanism at the centre of the EU architecture to shore up the eurozone depends in large measure on France holding back pressure on the bond market.

Another measure of the acute tensions bubbling in the eurozone was the widening of the gap between German and Spanish borrowing rates.

The gap widened to 452.2 basis points or 4.522 percentage points, exceeding a previous record set on Monday.

The cost of 10-year borrowing for Spain was about 6.3 percent, a level considered to be at the limit or beyond what Spain can afford to finance its public deficit and refinance debt. It had closed at 6.106 percent on Monday.

The equivalent gap between German and Spanish borrowing rates also widened to a record, further signalling great anxiety about the components of the eurozone debt crisis as Italy and Greece head towards new budget reforms under new governments.

At Moneycorp in London, analysts commented that investors “appear to have pulled stumps on their brief honeymoon with the new technocrat masters in Athens and Rome.”

They said investors “could not fail to notice how yesterday’s ‘successful’ auction of five-year Italian government bonds delivered a yield of 6.29 percent.”

Investors and people managing savings are buying German bonds, the low-risk benchmark in the eurozone, as a protection against risk.

This has the effect of pushing up demand, and therefore the price of German bonds already issued and traded on the market.

Sovereign bonds carry an interest rate or yield which is fixed at issue for the life of the bond. If the price of the bond rises, as is the case for Germany, the fixed interest as a percentage of the increased price drops, signalling the rate Germany would have to pay to borrow new money.

The process works in reverse. Hence, if savers are increasingly reluctant to hold or to buy French or Spanish bonds for example, the price falls, and the fixed interest rises as a percentage, setting a new level for the next borrowing operation.

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TRAVEL

UPDATE: Is it possible to drive between Spain and the UK via France?

Travelling between Spain and the UK during the pandemic has been very difficult due to border closures, cancelled flights and quarantines, but what is the situation like now? Is it possible to drive between Spain and the UK via France?

Driving between Spain and UK
Photo: Bertsz / 67 images/ Pixabay

Several readers have asked about the restrictions and necessary documents and tests needed to drive to the UK and if it’s possible. Here’s what you need to know.

Travelling by car between the UK and Spain at the moment is possible, but not very easy. Although it’s a lot easier now than it was before the state of alarm ended, it will still involve PCR and/or antigen testing, quarantine, and lots of form-filling. This will mean extra expenses too. 

Spain and France have both updated their rules on travel as restrictions begin to ease. Here’s a look at what you need to know driving between the UK and Spain, via France right now.

Leaving Spain

Movement in Spain has become a lot easier since the end of the state of alarm on May 9th. This means that you can easily drive across regional borders without the need to prove specific reasons.

There may still be certain municipalities or health zones that you might need to avoid because their borders are still closed due to a high number of cases, but for the most part, your drive through Spain, up until the French border, will be easy.

Keep in mind that some regions still have certain restrictions in place such as when bars and restaurants are allowed to open and a few still maintain curfews, so you’ll need to check the rules of those regions you’re planning on driving through.

READ ALSO: UPDATED: What are the post state of alarm restrictions in each region in Spain?

Crossing the French border from Spain

Travel into France is allowed for any reason, including for tourism and family visits. This easing of restrictions was introduced on May 3rd, which saw France opening up both its regional and international borders.

According to the French embassy in Spain: “Entry into the metropolitan territory from a country in the European area is subject to the presentation, by travellers over eleven years of age, of a negative result of a PCR test, carried out within 72 hours prior to departure. This obligation applies to all modes of travel (arrival by road, rail, air or sea)”.

They also state that all travellers will have to present an affidavit/certificate of international travel, certifying that they do not have symptoms of Covid-19 infection and that they are not aware of having been in contact with a confirmed case of Covid-19 in the fourteen days prior to the trip.

“If you are over eleven years old, you agree that a biological test for SARS-CoV-2 will be carried out upon arrival on French territory” it continues.

The certificate can be downloaded from the website of the French Ministry. The supporting documents must be presented to the control authorities at the border.

The test must be carried out within 72 hours of departing for France and the antigen test is not accepted. You must take a PCR test, otherwise, you’ll be refused entry to France.

A Spanish police officer checks PCR coronavirus tests at the border between Spain and France. Photo: RAYMOND ROIG / AFP

You can drive straight through France, as there’s no quarantine requirement for those coming from inside the EU.

Note that France still has several restrictions in place, but they are gradually easing. As of May 19th, the curfew was extended to 9pm and bars and restaurants were allowed to operate outdoor services only. This means that you’ll need to stop driving and find somewhere to spend the night after the 9pm cut-off time.

If you have to travel past curfew for an essential reason, you will need an attestation permission form, which you can find HERE.

From June 9th, the curfew will be extended again until 11pm and the interiors of bars and restaurants will be allowed to re-open. 

Masks are compulsory in all indoor public spaces across the country, and also outdoors in most of the larger towns and cities. If you don’t wear one, you could face a fine of €135.

Entering the UK

On May 17th, the UK government lifted its ban on all non-essential travel abroad and replaced it with the traffic light system, assigning countries to red, amber or green lists, according to their health data.

France and Spain are currently on the amber list, as well as most other European countries, bar Portugal, which is on the green list.

READ ALSO: EXPLAINED: The European countries on England’s ‘amber’ travel list and what that means

This means that you must follow the amber list rules.

The UK government website states that if coming from an amber-list country, even if you’ve been vaccinated, you need to follow these rules before you enter England:

 On arrival in England you must:

  • quarantine at home or in the place you are staying for 10 days
  • take a COVID-19 test on or before day 2 and on or after day 8

Children aged 4 and under do not need to take the day 2 or day 8 test.

You may be able to end quarantine early if you pay for a private COVID-19 test through the Test to Release scheme.

The traffic light list only applies to England, but Scotland also has its own traffic-light system, which at the moment has the same green-list countries as England. It is thought that Wales and Northern Ireland are likely to adopt the traffic light system too.

If you’re entering the UK from an amber country, you can go for any reason. It doesn’t have to be an essential trip and entry is not limited to UK nationals or residents.

Find further information on UK travel rules HERE.

If in the future, France makes it onto the green list, then no quarantine will be necessary. Regardless, of this, a negative Covid-19 test is still needed to enter England, plus another test on or before day 2.

What about driving back to Spain?

The UK is still advising against travel to amber countries for leisure or tourism reasons, which France and Spain are both currently on.

This isn’t a travel ban, but the official stand can mean that your travel insurance won’t be valid, so check your policy before you travel.

JUNE UPDATE: From Monday, May 31st, France is tightening up entry requirements for arrivals from the UK, following in the footsteps of Germany and Austria as European countries become increasingly concerned about circulation of the ‘Indian variant’ of Covid in the UK.

So what’s the situation if you are just passing through?

If you are returning to your permanent residence in another EU or Schengen zone country then you can travel, as one of the listed ‘vital reasons’ is returning home. You will, however, need to show some proof of your residency, ideally a residency card.

If you are travelling for another reason you can travel through France, provided you spend less than 24 hours in the country.

The testing requirement applies to all arrivals, even if you are only passing through France, but if you spend less than 24 hours in the country you are not required to quarantine.

You will also need to check the rules in your destination country on arrivals from France. If you are entering France from an EU or Schengen zone country you will need to show a negative Covid test taken within the previous 72 hours and this must be a PCR test. You can enter France for any reason from an EU/Schengen country.

And yes, these rules all apply even to the fully vaccinated.

To find out more about the rules and exceptions for travel between France and the UK click the link below.

READ MORE: Spain-UK road travel – Can I transit through France despite the new Indian variant restrictions?

Currently, the Spanish government website states that only citizens and legal residents of the European Union, Schengen states, Andorra, Monaco, The Vatican and San Marino, as well as those who can demonstrate through documentary evidence an essential need to enter Spain, will be able to enter the country.

However, Spain recently announced that it would welcome British tourists into the country without a negative PCR test from May 24th. 

READ ALSO:

The website also states that “all overland travellers (excluding children under the age of 6 years old) who wish to enter Spain by road from France, are required to present a negative PCR or antigen test taken within 72 hours prior to entry”.

This applies to everyone, even if you have been vaccinated already.

Please note The Local is not able to give advice on individual cases. For more information on international travel to and from Spain, see the government’s website and check the restrictions in your destination country with the appropriate embassy.

READ ALSO: Reader question: Can I fly from the UK to Spain to visit family or my second home?

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