00:00If this continues for one or two years, Ludovic, what does that mean for the risk premium being priced into the sovereign debt of France?
00:08Look, a lot more volatility for sure, and we've seen that already.
00:11This is one of the most volatile bond space that is there right now, especially in the European government spreads and bonds.
00:19I would say that, you know, 4% for the 10-year French is possible.
00:24And so that would mean indeed that little by little, we are creeping up to an area where the debt to GDP, the service of the debt to GDP is going to 3% and then 4%.
00:34That could happen very much before 2027.
00:37And then we are in the league with Italy and Greece.
00:40And of course, the rating could be migrated to even a lower notch.
00:44So that's, of course, the downside scenario that people need to watch.
00:47Just remind our viewers what that solution would be, Ludo.
00:50Well, it's very clear.
00:52If we don't make any progress, then it will be higher taxation.
00:55That's the problem.
00:56I think the main risk is this one right now.
00:58If we cannot make an agreement on how we cut expenditures.
01:01Of course, France has one magic bullet that has worked over the past crisis.
01:05If you remember 2012, when François Hollande was elected, it's raising taxation.
01:09And right now, there is two points of lower taxes that Macron passed that have not been financed.
01:13So, of course, the ultimate cost would be for the French savers and the French taxpayers.
01:19So, it's going to be an increase of taxation again.
01:22So, that's why having a solution now is much better.
01:24For the international investor, I'm not worried.
01:26The risk of default is peanuts.
01:29The risk of default is peanuts.
01:31We heard from Sophie Heun of BNP Paribas earlier in the show.
01:33And she was suggesting that there might be an opportunity, in fact, to get exposure to French assets at this point.
01:39It could be a buying opportunity.
01:41Would you be advising any international investors to dip their toe at this point?
01:44Is anything looking well-valued at this point in France?
01:49I think you need to wait a little bit more.
01:51So, I would wait for a re-entry tactically that the spreads go up for another 70 to 80 basis points.
01:58So, again, even 4% and above 10-year, I would consider it a topic for consideration.
02:054.5%, I would re-enter any time.
02:06Because, of course, then, you know, you have every tool on the, you know, the ECB is armed now to respond to this type of crisis.
02:13And so, I think, you know, we've learned our lessons for the past 15 years.
02:17We had a crisis.
02:17We made the Eurozone much stronger.
02:19Now, we know we cannot tolerate much more stress.
02:21And because the contagion risk will be too strong, by the way.
02:24France's idiosyncratic risk will just spill over to the other countries.
02:27So, of course, you know, I trust the Euro to not be reversible.
02:30And I trust Europe to do whatever it takes, if needs be, to calm down any pressure on the financing of our sovereigns.
02:38This is, we see that in the US, we will see that in the UK, and we'll certainly see that in Europe, yeah.
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