ECB: Italy and France's spreads towards convergence

Between early June and early September, yields on 10-year French government bonds rose by 20 basis points to around 3.5 per cent, while those on Italian bonds "fell by six basis points, reinforcing the longer-term trend towards a convergence of sovereign bond yield spreads" in the two countries. The ECB writes this in its Economic Bulletin, noting that "market participants have been paying closer attention to fiscal developments, especially in France, where the announcement of a confidence vote in early September has raised concerns about delays in fiscal consolidation".

The euro area economy grew by 0.7 per cent in the first half of 2025, thanks to resilient domestic demand: indicators point to 'a continuation of a modest expansion in activity in the third quarter of 2025' with 1.2 per cent growth for the full year, followed by +1 per cent in 2026 and +1.3 per cent in 2027. The ECB also writes in its economic bulletin that economic surveys 'suggest that both the manufacturing and services sectors continue to grow, signalling some positive underlying momentum in the economy'.

According to the bulletin, the overall impact of the EU-US tariffs agreement and the new global environment 'will only become clear over time'. However, 'later in the forecast horizon, economic growth in the area should strengthen', supported by the recovery of real wages and the resilience of employment, as well as by 'new public allocations for infrastructure and defence, especially in Germany', which will stimulate domestic demand in the euro area.