Britain could become “an island of stability” in financial markets as France is rocked by Emmanuel Macron’s debt binge, UBS has warned.
Shahab Jalinoos of UBS said the UK’s reputation as Europe’s “problem child” could be reversed amid increased political uncertainty in France after Macron triggered a snap election.
Britain’s position “is very different to the French case, where there is a risk of a clash with the EU Commission, for starters”, he said hours after Brussels criticised Mr Macron’s borrowing binge.
The French president announced a snap election following his party’s poor performance in the European parliamentary vote, raising fears that the far Right under Marine Le Pen will gain more influence.
It set off ructions in financial markets as debt investors fear this risks more borrowing.
Mr Jalinoos said the far Left is also proposing radical policies in France.
He added: “In that context, you could find the UK actually could look like an island of stability, finally, after 10 years of looking like the problem child in Europe, the situation could flip around.
“From the pound’s perspective, that is probably a good thing.”
Rise of far Right in Germany
Britain could become even more appealing if the far Right performs well in German elections next year, he said, potentially pushing up the pound by as much as 10pc.
His comments came after the European Commission said France is at risk of fines if the country’s finances are not brought back under control.
In an announcement on Wednesday, policymakers in Brussels said France is among seven nations being monitored for running too large a deficit.
This means France has been put into a so-called excessive deficit procedure, which can result in a fine if borrowing is not scaled back.
The reprimand comes at the worst possible moment for the French president, who has sparked a period of political and financial turbulence after calling a snap election earlier this month.
The prospect of Mr Macron losing to Mrs Le Pen’s National Rally party has wobbled debt markets, as investors fear the country will face higher interest rates if borrowing rises.
The European Commission warned on Wednesday that the president’s economic plans imply spiralling debts, claiming this demonstrates “high risks over the medium term”.
According to its baseline 10-year projection, the EU expects France’s debt ratio to rise to about 139pc of GDP by 2034, up from just over 110pc currently.
It said: “The debt trajectory is sensitive to macroeconomic shocks.”
France is alongside Giorgia Meloni’s Italy as countries that have been found in breach of budget deficit rules, which require borrowing to be below 3pc of GDP per year.