French Political Ructions Don't Signal Euro Crisis Redux

Mark Twain's aphorism that "history doesn't repeat itself, but it often rhymes" may be overused. But the market reaction to the political turmoil gripping France has distinct echoes of the euro crisis more than a decade ago. As talk of “Frexit” surfaces, it’s important to note that there are significant differences between the current situation and the travails suffered by the PIGS — Portugal, Italy, Greece and Spain — back in the day.

France is part of the bedrock of the European Union, not just a peripheral nation. Its economy is nowhere near as weak as Greece’s was in 2012. While both its budget deficit and debt burden are deteriorating, neither is as bad as those of Italy. Moreover, the European Central Bank is now much more proficient at coming up with new tools to defend the common currency project.