The euro has reached $1.12, its lowest level since early 2025, and this decline is related to concerns about the debt in the eurozone, particularly in France. At the start of trading on Monday, the euro has decreased by about 5% since the beginning of 2026.
Reasons for the Euro's Decline
Ricardo Amaro, chief economist for the eurozone at Oxford Economics, stated that this decline is due to changing investor expectations regarding the U.S. Federal Reserve's policies, which are anticipated to raise interest rates due to increasing global debt rates. He added that this recent selling is particularly due to concerns regarding France, where investors have prepared for higher financial risks.
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Concerns Over France's Debt
The sale of French government debt intensified last week, and due to doubts about its long-term sustainability, the yield on 10-year French bonds reached 5%. France has long faced fundamental financial issues, and since Emmanuel Macron took power in May 2017, public spending has increased while deeper tax cuts have been implemented. As a result, the national debt of the country has risen by over one trillion euros.
The debt-to-GDP ratio in France has now approached nearly 118%, and persistent budget deficits are being recorded. The country's annual budget deficit is now regularly over 5%, while it was 3.4% when Macron came to power.
For many investors, public concerns about low growth levels in the eurozone and rising energy prices have increased attention on France, leading many to turn to safer options like German government debt.
The pressure from this situation on the euro and other government debt markets, including Italy, has led to increased calls for the European Central Bank (ECB) to take action to prevent concerns about France from turning into panic.
Amaro states that the current situation is a challenge for the ECB as the bank must act without worsening the situation. He predicts that policymakers will continue to monitor currency developments between the dollar and the euro but will likely refrain from attempting to influence the market temporarily.
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