Webinar: Is France pushing the eurozone into a new sovereign debt crisis?

Bonjour et bienvenue everyone. Thank you so much for joining us today. as we delve into one of the most important stories in European markets today. that is the situation France,. We have rising deficits, mounting debt. and political uncertainty ahead of the presidential elections next year, which has pushed... yields on French bonds to 5% or almost 5%, which is the highest highest level since 2002. while the spread over German bunds has widened to the highest level. since the Eurozone debt crisis. So this has inevitably raised questions about fiscal sustainability France,. and the impacts on the wider Eurozone. So how France, get into this position? What are the government's plans? How credible are they? What does it mean for the French economy, the European economy, bonds? and of course the euro. And what, if anything, can the ECB do about all of this? Well, these are questions that will... We'll be looking at with our experts over the next 30 to 40 minutes. Let me introduce them to you now. We have Charlotte de Montpellier. who is Senior Economist, covering France. Carsten Brzeski Global head of Macro covering the wider Eurozone. We've got Parit Garvey, he's head Global debt and rate strategy. And Francesco Pesole is our FX Strategist looking at the euro. But first of all, I'm Rebecca Byrne and I'll be guiding you through this session today. If you do have a question. There is the questions tab. You can put them in there and we'll get to them at the very end. But first of all, let's go straight. to a poll for you. We want to know what you think is the most likely. the outcome of France, 2027 budget. So do you think it will... Pass broadly unchanged. It passes but only after significant concessions. No budget is adopted before year end. Those are your options. and we'll come back to your answers in just a second because it takes a minute to come through. But let's go straight to Charlotte. So France,' deficit well above 3%. and the three percent limit set by the EU. What went wrong? How France,... end up in this position. Yeah, actually the situation is quite difficult and we see deficits that is much worse than in other countries in Europe. with being above 5%, probably 5.4% this year. could be even higher next year. And this is clearly, it has been the... clearly since a few years. The big problem is since the dissolution of the National Assembly in 2024. And this means that the government France, do not add does not have a majority and this basically means that they are not able to implement some restrictive budgetary policy so things just deteriorate. And the issue is that it has led to a very bad... that dynamic which has increased quite strongly. currently compared to the 15 years average, and this is clearly not the case in other European countries. France, is a bit in a specific situation. where things keep deteriorating because of the high deficit that is much higher than elsewhere. We have debt to GDP ratio around 119% right now. will probably increase to 122% next year. And all of this is happening in a context of very weak growth. So that's relatively new. That was not the case a few years ago. but currently economic growth France, is much weaker than in other European countries. So this is quite a bad mix, bad situation, everything together. and clearly this has, I mean, this means... what we do see right now. Okay, do we have the results of the... the poll loot could they have they come in yet let's have a look most likely outcomes. So you think it's... So, well, it sort of splits, isn't it? It passes, but only after significant... Concessions, 41%. Almost as many of you think that. no budget will be adopted before year end. And... Charlotte, the government has made some proposals to reduce the deficit, but you say this is not... going to solve the debt problem. Why not? And what needs to happen in order? to really make a difference to the debt trajectory. Yeah, so the government has aimed to reduce the deficit to 5% of GDP for next year. This would be much better than this year, which is 5.4%. percent of GDP and it's also better than last year. But for this to They will need to do a lot of savings, around 43 billions of savings. a lot of measures that need to be taken. This will mean a higher taxation rate. basically and also much weaker growth of spending. Without this budget, if we would be in a situation where the budget would not be... That would be even worse, so things would continue to deteriorate. to 6.5% for the deficit to GDP ratio, which would be a very difficult situation. And even if the budget goes through and we actually do see 5% of deficit next year. Further measures, further things would need to be done. after next year because the dynamic currently is not good. This means that because of higher interest payment that needs to be done, Every year they need to improve much better than that. So it means that it's not only about next year, it's about the next five years. plan and of course right now we have a lot of uncertainty about this plan because we all depend on the election results that are coming. One important element and probably the most important element is that things need to be done. on the pension side. Because if we look at... the evolution of spending France, in the past few years. If we compare that ...to the rest of the Eurozone, basically where there is a big difference between France, the other countries. is the pension system, which is much more costly. And this will continue. to increase. So it means that if we want to see some real improvement in the debt dynamic France,, It will need to reform the pension system. which costs much more money than elsewhere. The issue for that is that it's highly unpopular. Yeah, and it's the same sort of across Europe, but much more... much a bigger problem France,. But as you said, tackling all of this is really hard politically, isn't it? You've mentioned that there are... elections next year. There's no stable government. even these proposals that are being made now, there's no, it's not clear that they will be. past. So how do you see all of this playing out? Yes, indeed, it's quite unpopular and we do see already some Big social unrest France, and the likelihood that it will increase in the next few weeks. It's quite high, so we are probably... going to see even more than that. But for the budget process itself, it's clear that the government doesn't have a majority. So it cannot pass the budget easily through the parliament. it means that we are not going to see some vote in favor. of the budget itself in the next few weeks. There will be a lot of discussion and those discussions will probably collapse at the end because of this no majority, it means that the government will... We need to use a special article of the constitution. which is the 49.3 article, this one would mean that the government can pass the budget without the formal approvement of the parliament but the issue is that it will open the door for A motion of no confidence. And so in order to avoid this no confidence vote, They will probably have to do some concession. So quite difficult. Our best case is that it will go through this very special article. but probably with concession. There is another way to go through which is called ordinance. It can happen by mid-December if the discussion... do not go through. It's even more risky, politically speaking. So all in all, it means that the discussion will be quite difficult. It will still last. A few months we could see some light at the end of the tunnel by mid-December. And probably we will see a budget going through because at the end Opposition parties, they don't really have the willingness. to make the government fall so close to the presidential election that are going. to happen in 2027. but still it's likely that this budget is a bit more ambitious than what is on. paper right now Do you think that passing the budget would materially reduce the risk around France, does it just... shift attention to the presidential election. and the legislative elections next year. Yeah, I mean, it will probably help in the short term because clearly it's one less risk but the most important thing is the depth trajectory and it's up after 2027. So, of course, then the attention will turn into the election. who is likely to win the election and most importantly whether the new government will have a majority. And this is very difficult to say at this stage because they will probably have... We will probably see legislative election. after the presidential election. All in all, currently the polls indicate that lopin is likely to win but in the second close the second one that is likely to go to the second round is Mélenchon very close to the centrist Edouard Philippe. A lot can still happen and I would say that there is a lot of uncertainty regarding the because plenty of people are simply undecided. But so that will be important and what those candidates are Willing to implement France, after 2037 will probably be very important for market going forward. Well, let's talk a little bit more about Marine Le Pen because she is ahead in the polls. And she says that she can deliver 136 billion euros of annual savings. and is aiming to bring public spending below 50%. percent of GDP by 2032. How credible is that? Yeah, so it's quite a change already that the Rassemblement National has decided that public finance credibility is important, so they completely changed. The way of thinking about it and they probably want to position themselves a bit. like Meloni in Italy. The issue is that the plan that is on paper right now is quite not credible. So it relies on very large savings whose feasibility is a bit uncertain or very uncertain. the assumption behind those savings and what it will lead. are very optimistic from a Macro point of view. and they also want to increase savings. They also want to increase spending and tax cuts. So they want to save more. and those spending increase and tax cuts. All in all, it means that the plan on paper is unlikely. to lead to a very big decrease in the deficit to GDP ratio in the next five years. They will have to adapt this plan. in order to go into the direction that they have set. at this stage is still very much not credible, I would say. Let's be honest, the other... discussion the other plans that we do see are also quite optimistic, all of them. So it means that after the election, there will be a big work. In order to address the public finance situation that is not going to be solved very easily. It will take years and it will need a very big savings measure. from any government after the election. Okay, thank you very much, Charlotte. We'll be coming back to you probably at the end. I'm sure there are lots of questions. questions from the audience. But now we're going to be looking at the impacts on the bond market. First, another poll for you. Where will the 10-year spread between Germany and France, at the end of 2020? 2026 currently about 137 basis points below 100 basis points so some significant tightening above 150 basis points further widening or sort of broadly where we are now between 100 and 150 basis points. We're going to go to Padhraic. And French bond spreads have obviously widened. pretty sharply. But what exactly are markets pricing today? Is this a story about higher deficits? political uncertainty or are investors starting to question France, status as one of Europe's core sovereign credits. Yeah, thanks, Rebecca. So to understand the market mindset here, you've got to look at the... The EMU regime is a bit of straightjacket. It's a single currency. So the only way the marketplace can... voice its discontent is through wider spreads. And if we just look at a bit of history here. The reason we have the Eurozone in the first place. is because of France, mean, the French cajoled the Germans to lose their Deutschmark. and managed to push this whole thing through. And we're used to the... German-French axis. And when one of those whales is seemingly punctured or at risk of falling off, it brings the whole project in. into stress. So this is the way the marketplace would look. at the bigger picture. The other thing the markets will look at is they will look France, and they'll see it as a a kind of high tax Scandi style economy that produces a extrapolated debt dynamic that's close to Italy. And it's very difficult to direct to rectify that and what the markets are looking for. is a bit of solution to the primary deficit situation in particular. And the problem at the moment is that You know, there is domestic protestation dominating the moment from a political perspective. And the recipes offered by the right and the left are unsatisfactory. I mean, the left has even voiced... the possibility of debt write-off. I mean, that's... That's a red flag to a bull to the debt markets. And the right is... is even quite relaxed on the retirement day. So the market sees all of this. and doesn't like it and has decided that the path of least resistance is wider. Hence the big widening we've had so far. So I suppose the question is how much wider, how much... can OAT bond spreads widen from here if this uncertainty persists? Yeah, if you look at the bigger picture in terms of spreads, We're currently at really, really elevated levels. And it's always useful to... to have some benchmarks here. So if you look France,, France, a double A rated. You know, it's price at the moment as. If it's going to slip into triple B and worse, it's around 140 basis. points We've been here before. We were here back during the... The debt crisis that saw Greece The fault I would say some of the benchmarks here Um, iTrucks main. which is investment grade credit, is about 100 basis points. the France, crossover. is around 375. France, is 140, which is 40 basis points over... the average. credit spread. So it's really wide here. And I would say, when we look France,, we are looking France, as a A credit story. It's not a solvency story. If we were talking about French at the French default risk here. Okay, then we go back to where Greece was. Greece was 33% over Germany. By the way, that's 3,300 basis points, Greek defaulted. Ireland was 8% over Germany. didn't default, but the banks did default. So how high we think we're there, Rebecca? But look, this is a very flighty market. And I would say the next level that this marketplace would look at is around 200. basis points if it wanted to get nasty about this whole story All right, so we have a look at those poll results and see what... the audience Thanks. So we asked where will 10 years spread? Where will it be at the end of 2026? And it looks like sort of where we are now. So sort of agreeing with you around 52. 3% with 41% saying we might see further widening. But Parag, at what point does this spread widening become a problem for... the rest of the Eurozone. Yeah, there's more positive than negative here. Rebecca, I mean, if you wanted me to paint... a dour story. You could paint a story whereby a right-leaning government. really does push on the We leave the Eurozone agenda, which is kind of unlikely. We saw something similar play out initially where Georgie Maloney. got voted in as PM. And it's really interesting to look at this chart because what you see here is that practically from the moment she got voters in. Italy began to perform. And if you look right across the Eurozone, Italy is now around 100. It was typically 200 over Germany. Spain is around 60, was typically 100 basis points over Germany. So one of the reasons here, Rebecca, is that the periphery is... outperforming versus the core. Germany, for example, has had a pretty difficult time to generate growth over the past year. past couple of years. So we're in a decent place. So if you wanted to push on this, you would have to have. white-leaning governments. really pushing on an anti-emu agenda. Spain has had some political wobbles. And if that pushed anti-EMU, that's where we'd have to go to. Because I don't see it this way. point that there is a solvency issue, it's a credit issue and the credit story in the periphery. is actually not that bad. So I'm relatively benign on how bad. Things can get unless politicians really mess things up. which is always possible, obviously. But thanks, Padhraic. We'll come back. to you, I'm sure, at the end. Let's go to another poll now. How likely is it that the... That's the French situation. could trigger broader sovereign stress in the eurozone very likely possible, but not the base case, unlikely or very unlikely. We're going to go to Carsten. Now for a look at how this is impacting the wider Eurozone. What do you think, Carsten? How might this situation... affect the economic outlook for the eurozone as a whole. Well, Rebecca already mentioned the... the um the axis uh german the german franco axis which is so existential and important for the entire Eurozone. And that is in case this is true. When you look at growth, the funny thing is, since the early 2000s, France, always pretty much bang on with the the euros on average. in terms of GDP growth, while it was germally fluctuating either below or then above the the euros on average We've now had over the last couple of years a situation in which Germany was clearly underperforming the Eurozone. And the second largest economy France, was the stronghold. for European growth. Now that we're entering this period that Charlotte nicely described, of uncertainty is probably a story austerity as well so slowing down the French growth prospects. At the same time, also, this will weigh on the Eurozone. total growth prospects and whether this will be really compensated or offset entirely by a stronger Germany. is currently still unclear so yes it will weigh on our own out Look for Eurozone growth and the hope that we are having with our at least shorter term growth outlook for the entire Eurozone. is that this physical stimulus in Germany is finally feeling through with of course for any german here the big I would say alert that Germany currently can afford it. But if German is not able to translate these fiscal stimulus measures into also higher potential growth. Germany could easily end up as a second France, five or ten years from now. Interesting. Well, Padhraic seemed fairly relaxed about the bond market situation. But from an economic perspective, how concerned are you that this could actually morph into something more systemic. I would never to disagree, dare to disagree with Rebecca, obviously speaking. And no, but he's right when you look at the But it's not only economics, Rebecca, it's also the institutional setup. of the Eurozone. And this idea that this could be the Euro... sovereign debt crisis to 2.0 is in my view really far-fetched because France, not a Second Greece in 2009-2010 we all of sudden had a fiscal deficit of more than 15. percent of GDP in Greece. Greece was highly dependent. on foreign investors. when you look at the French economy, they are having a current account, which is more or less in balance so a completely different story there and then we have what is called European firewall. So we have a couple of new institutions that were put in. place in order to be a kind of firewall against contagion and the most prominent What is this European stability mechanism? that could also offer help if needed. Final point is that back in 2010 and 11... We had several crises. Macro crises that then turned into sovereign debt crises in the periphery. of the Eurozone economy. Right now... It is, like Paul Agosin said, the periphery, which is... fundamentally in a much better shape. kind of they brought public finances under control. They are having better growth prospects, also thanks to the European Recovery Fund and other measures. So I think the situation is... is not so similar to what we had in 2010, 11 and 12. So therefore, the risk, and there will always be a bit of contagion, but the risk that we are really... entering a second sovereign debt crisis in my view is pretty low. Okay, let's see what our audience had to say about this from the results of the poll. poll how likely is it the french situation will trigger broader sovereign stress possible 65% Very likely, 19%. Okay, those are interesting results. But Carsten, you're not expecting a debt crisis, really. But if the pressure on French bonds... did get out of hand. What could the ECB do? What are its options? You've mentioned that this This transmission protection instruments could help, but it's got very strict conditions, hasn't it? Tell us about that and what other options the ECB might have. Yeah, that was of course the first question we received when this political and fiscal mess France, started. Will this now trigger this transmission protection instrument of the ECB. In other words, would the ECB now... intervene and start purchasing French bonds. Well, I don't think so, because it first of all would need really some... fiscal measures by the French government that France, actually compliant. with the European fiscal rules or the fiscal framework. So this is so far not the case. So the hands of the ECB are actually tied. Even if they would want to intervene, they can't right now. So I think I see a kind of three-pronged... Strategy or escalation strategy. So the first one for the ECB would actually be to take away... these hawkish rate hike expectations in financial markets. How do you do this? By starting to talk much more. ...doubishly by pointing to the fact that the bond market is currently taking over. The ECB's job. What do I mean by that? This increase in bond yields that we've had since the last ECB meeting in mid-September. is already a kind of equivalent to two additional policy rate hikes France,. one additional policy rate hike for Germany. So the monetary policy stance has already become much more restrictive. taking away the need for the ECB to deliver on additional rate hikes we still have one more rate hike by the ecb and that's it but it could actually happen if the situation was to escalate further France,. that the ECB entirely takes the next rate hike off the table. So that would be step one. Step two is we still have quantitative tightening. So the reversal of the QE of the past. And this could be reversed again. So that maturing bonds in the ECB's balance sheets will be reinvested. So this reinvestment then could of course then be used discretionary and also to start buying some French bonds. the magnitude would be far too low to really make a difference, but it would be symbolic. And then only the third point would be TPI, outright bond purchases. So outright bond purchases to avoid... for the contagion. But here, as I said, So some austerity measures by the French government. would be a pre-requirement for the ECB to start it. If we don't see any austerity measures France,, you could even think of situation in which then the ECB would announce that they are willing to purchase all other bonds. except France, in order to avoid contagion. but not to save the French government. Okay, you might have answered just a few of the audience questions there. But you say that the surge in bond yields since the The ECB's last meeting has had a similar impact on growth and inflation. as a 25% rate hike. You've written that recently. So will this affect the banks? sort of near-term future plans to raise rates again. Yeah, I think so. We are, well, we have the next meeting in. in two weeks from now. So the Macro situation is not justifying any rate change in. Two weeks from now, this is going to be on hold. Then when you move to the December meeting, the expectation so far is that the ECB will deliver. another rate hike. When you look at markets pricing, there was still a majority in financial markets. with expecting additional rate hikes in 2027. But this French situation now is... taking away the pressure from the ECB to really deliver. on these rate hikes. and doing less, also sounding. more dovishly could take away the pressure from France. but would also prevent the ECB from creating any unwarranted economic accident by having overly restrictive monetary policies in the Eurozone. and then also prevent the ECB from really pushing the Eurozone economy. further into stagnation. Right. Thank you very much, Carsten. We're going to turn the focus to FX now and the impact on the euro. We're going to go to Francesco. These concerns, they've obviously taken a toll on the euro. It's just fallen to the lowest level. against the dollar since around May last year. Do you think that the market has now priced in? all of the bad news or is there further downside risk for the euro? Yeah, so the euro has obviously fallen. It's been very visible. because it hit new lows. It's a bit of the nature of of the relationship between European bond spreads and the Euro is that the Euro doesn't really care about them until it does and when it does it can create this very tight link And for some period of time, it can really trade a lot on the back of this. news about the bond market and in this France,. But we have a way to try and measure how much French risk has contributed to the Euro downside. We look at a fair value model. in the short term that takes into account the number of drivers from short-term rate differentials to equities and commodities. And normally that tells us what is the fair value. for the euro at any given time and whenever there is a meaningful undervaluation in spot that is telling us that there is a risk premium uh what we're observing now is that the risk premium has oscillated between one percent to two percent since the French risk has kind of exploded at the end of September. When you look at this chart, you can see other instances where the orange bars. are where we had um so there was sharp moves in in in French or Italian or Spanish or combination of them bond spreads to the bund and in those occasions Often the misvaluation in the euro, so the risk premium, the negative impact in the euro was larger much larger so So before... drawing directly the conclusion that there is a lot of more downside risk for the euro we must Take into account something that also Constance mentioned. And that's the impact on ECB pricing. So around the end of September markets were thinking about 80 to 90 basis points of ECB tightening. by June, July of next year. And obviously one of the main impacts of Because of this French risk rising is that markets have started to think that the ECB won't be able to deliver that much tightening given the bond situation. And So we've seen about 30 basis points being priced out for the June and July contracts. And that obviously has lowered the fair value of the dollar. and so perhaps the actual impact on your dollar has been closer to 3%, still not as wide as it was in 2012. or even in 2018 However, this is probably justified by the fact that we're not in that same situation we've discussed in this call. So markets are not as concerned. One could make the point that perhaps they are underestimating the risks of further widening in fresh spreads. There is definitely a risk. in the scenario that Padhraic outlined where we get to 200 basis points. I think that's a strong case to be made for the euro-dollar to trade below 110. But I think for the moment, the FX market is quite forward looking. and perhaps there's still this enough hope that... the election will bring a government that if it's going to be Marie Le Pen as the polls suggest will set a similar path than the one we've seen in Italy with Meloni in terms of... sort of better fiscal credibility and that's will allow the euro to return to a situation where it won't really care too much about what's happening. running to bond spreads Okay, is the dollar also playing a role here though? It's been trading on the strong side, right? Yeah, absolutely. And that's the other factor, right? Look, you're a dollar. You have to account what's happening. in the dollar as well and it's been a strong period for the dollar the bond market slump across the Global makes a defensive currency like the dollar uh obviously more attractive we had a a A hawkish Fed yesterday and today we've seen CPI, PPI numbers. coming on the strong side, suggesting that it's quite likely that the Fed will hike at least once more. And obviously, markets will continue probably to price in risk of further. tightening by the Fed in 2027. So we must take that into account often. And a cleaner way of looking at the impact on the FX market of French bonds is the Euro-Swiss. We've seen that move actually just today below 93. Still, when you look at the move. It looks sharp in a chart, but it's not huge. And it is obviously more impactful in a way because the Swiss brand. It was very much an unloved currency before this French risk kind of exploded. But so it is quite telling that it's now doing quite well. It's very much linked to the French story, but at the same time these moves in the FX markets are telling us what the... bond marketing style, I guess. So there are some... signs, some some sort of alarm bells are ringing but we're not in an emergency. Okay, if this political and fiscal uncertainty persists into the 2027... presidential elections, what's the most likely path for the euro? Yeah, so we just updated our Eurodollar forecast. We incorporated the French risk in there. So we're now looking at the 110 to 115 range. for the next couple of quarters. We're more bullish. We were probably not expecting... So the impact on the French bond market to come this early. and now that it is here we don't really have expectations for a material improvement. in the bond market there. And so in a way it will be harder for your dollar to trade sustainably. uh above 115. obviously the ecb and the fed are the other two considerations to be made uh we Expect December hikes by both the ECB and the Fed. Ultimately, in 2027, we think there won't be any more rate hikes. hikes and that should favor an environment where euro dollar trades a bit higher because Repricing lower and Fed rate expectations should have a positive London effect. Global risk sentiment and your dollar is a pro-cyclical pair and should be trading higher. But again... relative to a few months ago, we are more cautious on the upside. there and so we're only the q117 for uran at 2027. All right. Thank you very much, Francesco. We have had a lot of questions from the audience. So let's... Let's go to them now and try to get through some of them. I think we've answered... a fair few, but let's try a few more. So probably, yeah, this one's for Charlotte. And in an optimistic scenario, France,... were to take measures to lower its debt. what would be the impact on French growth of restrictive fiscal policy in the short to medium term. Yeah, so this... This restrictive budgetary policy will mean that growth prospects expect at least for 2027 and probably also for 10 feet and 38 are going to be lower France, than in other Eurozone countries. So we expect for 2027. that growth France, will be around probably 0.6, which is much lower than what we expect. 1.2 for the eurozone as well, so of course it will have quite negative consequences. to be fair, to be clear, the fact that we expect such a weaker group. France, and in other countries is also because all this situation on the bond market and the uncertainty regarding government measures. is also having a direct impact on investment from both companies and households. So they are much more waiting to do that and the cost of financing has improved. increase quite strongly so all of this together is uh this does mean that uh Weaker growth is expected for next year than for the rest of the Eurozone. Still, we do think that the eurozone... the French growth will gradually move higher going forward. compared to this year and if we have a decrease in uncertainty this clearly could help at the end of 2027 and in 2028. Okay, this might be another one for you, Charlotte, actually. And it's talking about the... The TPI, it's a good question. Given the existence of the TPI, which Carsten was talking about a moment ago. Do you think this gives France, ability to adopt reforms at a slower pace because it's a back... stop that it would use if needed. And France, too big to fail. Yeah, I mean, certainly it seems that... So the reality, the situation in public finance It took quite a lot of time for a policy maker France, to to take that into account, the seriousness of the situation. and it's probably it has been helped but by the ECB and monetary policy. I wouldn't say that it's the TPI itself, it's probably the... the the answer i mean what has happened for monetary policy for a few the few previous years clearly but we have seen that suddenly when the spreads have been going up. directly policymakers were asking will the ACB intervene when so that was like the first thing to think about intervention of the ECB So certainly it does play a role. Is it the only thing that plays a role? No, I wouldn't say that it's... only due to the ECB and the stance of the ECB, I do think that basically this The fact that there was no majority in the parliament was the big thing that led to the current situation with a deficit that is very very difficult. to decrease in terms of compared to GDP. Okay, one for Padhraic, talking about the OAT spread, 10-year spread. Let's assume there's no budget this year. In the case of no budgets... and in the event that there is one, but with big concessions, where do you see that spread? Yeah, so if we take a... a pretty negative scenario. I find it I find it difficult to see it above 200. you know, 200 is... The markets will often look for the next big figure. So, I mean, the next obvious one is one. 150, we're very close to that. wouldn't surprise, I think actually the polling agreed with the idea that but we could well be within that range. 200 is a stretch. So look, I mean... If we were to go... above 200, I think we're heading into... really really dangerous territory it's it's it's so dangerous that it's uh it's highly unlikely to happen. So... So yeah, I'm not going to push it beyond that. That's as bad as it could or should get. And I think at that level, unless we're talking about the Eurozone coming to an end. it will be a fantastic level to get long OITs. One more question for you, Padhraic, actually. Somebody's saying, while French spreads clearly increased last month, so did bond yields in many countries. including Germany, the US, Japan, what is driving... the high yields worldwide and what is the role of sovereign risks there? So sovereign risk is relevant. But it's more to do with... The deficit story across developed markets is... It's a bit of an issue whether you're going to Japan, the US or... indeed the Eurozone. I think printed inflation is an issue as well. Inflation expectations are benign, but printed inflation, what were actually delivered in terms of inflation? inflation is problematic i mean it's got It's 4% in the Eurozone. That's a problem. I think there's a little bit of an AI piece as well. In the sense that there is a productivity story to be told. about AI issuance pressure at the back end is a factor. There's a whole series of factors. What's What's really interesting is that rare deals have dominated the move and I mean, this is where we're a little bit... to apprehensive going forward we think this process continues typically when rates rise it takes pressure off spreads but but here I worry that higher rates, if it became... uncontrolled would add pressure to spreads because of the death dynamic risks that it raises so yeah if you want me to go down a negative path that's uh that's one that's one path we could uh Certainly Trot. All right. Thank you very much, Parag. Well, we are just about out of time. There are more questions, but we've written a lot about this actually. And today we just published our monthly. economic outlook, same fears, different crises. You can find that on our website at think.ing. We hope that you've enjoyed this session. Please do join us next Thursday, October 22nd for our next webinar. where we'll be exploring our new ING Research, Europe's investment landscape, what's changing. and why it matters. With that, I'll say thank you very much and see you next time.