Euro hits 17-month low as French fiscal worries rattle markets

The euro slid to a 17-month low against the U.S. dollar on Monday, dropping below the $1.12 mark as political and fiscal concerns weighed on European markets. The currency is down approximately 4% since Sept. 8, reaching its lowest level since May 2025.

France is currently navigating high deficits, rising long-term borrowing rates, and a political stalemate over how to manage these fiscal pressures. These rising borrowing costs have drawn comparisons to the eurozone crisis of the early 2010s, though analysts note the European Central Bank now possesses more tools to contain such market stress.

In Spain, Prime Minister Pedro Sánchez called a snap election for Nov. 29. The vote could either strengthen Sánchez's position or open the door to a populist right government, adding another layer of political uncertainty to the region.

Former European Central Bank board member Lorenzo Bini Smaghi published an opinion article in the Financial Times on Monday calling for the central bank to suspend its quantitative tightening program. Bini Smaghi argued that the ECB is better equipped than in the early 2010s to address tensions in financial markets that could endanger the integrity of the single currency, citing its bond-buying tools and programs that address spikes in yields.

However, Bini Smaghi questioned why the ECB continues to implement quantitative tightening, which involves shrinking its balance sheet by not replacing government bonds as they mature. He wrote that this policy forces private investors to absorb a larger share of the net supply of government bonds at a time when long-term rates are already under upward pressure.