The euro has dropped to its weakest level against the US dollar in 17 months, declining about 0.8% to fall below $1.12 on Monday. This decrease follows investor concerns over France’s rising debt and political uncertainty across the eurozone. The euro has slid approximately 1.2% this month, continuing a downward trend from its January peak of $1.20.

Investors are worried about France’s increasing borrowing costs and the government’s attempts to manage its budget deficit. French 10-year government bond yields have reached their highest point since 2002, and the spread between French and German borrowing costs has widened to its largest gap since 2012. These developments reflect broader concerns about fiscal stability in France.

To address its fiscal challenges, France’s minority government has proposed a €54 billion savings plan aimed at reducing the budget deficit from 5.5% of GDP this year to 5% next year. However, this initiative faces political resistance, which raises doubts about its effectiveness in controlling public finances.

The situation is further complicated by Spain’s decision to hold an early general election, adding to the political instability in the region. Analysts warn that the combination of political unrest in France and Spain, along with concerns over sovereign debt, could exert additional pressure on the euro and pose risks to the broader currency bloc.