Pas bien

Something unusual is happening in European bond markets: French 10-year yields are now trading at the same level as Italian ones. Traditionally, investors demanded a clear premium to hold Italian debt, but this gap has disappeared.

The reasons are twofold. France is struggling with political fragmentation, rising deficits, and repeated leadership changes. Italy, on the other hand, enjoys a rare moment of relative stability under its current government and has managed to return to a small primary surplus. In both cases, however, the structural challenge remains the same: high levels of debt, higher refinancing costs, and welfare systems that are among the most expensive in the OECD.

At ECP, we prefer to look beyond the sovereign picture and focus on companies. In France, for example, we hold Michelin, Kering, Axa and Dassault Aviation. In Italy, we invest in Exor, the Agnelli family holding trading at a significant discount to NAV. These are global businesses with strong balance sheets and resilient models, well equipped to navigate domestic fiscal headwinds.