Part 6/12:
When foreign investors lose confidence, they tend to sell, causing bond prices to fall and yields to rise further. This cycle can swiftly spiral into a debt crisis akin to Greece’s 2008 turmoil, where a small nation’s default shook the entire financial system.
The Constraints of the Eurozone and the European Central Bank
Unlike Japan, which faced its own debt crisis, France cannot simply have its central bank buy back its debt to stave off default. France is part of the Eurozone and shares a monetary policy with the European Central Bank (ECB). The ECB’s mandate prohibits direct bailouts similar to Japan’s central bank interventions.