Accra:The common currency of 21 EU member states is depreciating against the US dollar due to growing financial and political uncertainties within the region. Concerns of a repeat of the 2012 debt crisis have resurfaced, spurred by France's fiscal challenges, political turmoil, and ongoing street protests, along with Spain's snap elections and Italy's debt issues.

According to Anadolu Agency, the ongoing Middle East crisis is driving up energy costs, contributing to global bond market volatility. Persistent inflation is further pressuring the euro's value downward, establishing a medium-term trend. The euro/US dollar exchange rate has been decreasing since reaching a January high of 1.21, recently dropping to 1.11, its lowest since May 2025. This year, the euro has depreciated by approximately 5%, highlighting the currency's fragility despite recent resilience against bond market volatility.

France, the eurozone's second-largest economy, plays a significant role in the euro's depreciation. The country's 10-year bond yield has reached its highest level since 2002, nearing 5%, amid geopolitical risks and global bond sell-offs. France's public budget deficit has widened to 5.8% of GDP, surpassing the EU's 3% threshold, According to French National Institute of Statistics and Economic Studies. The national debt stands at $4 trillion, or 119% of GDP, exceeding the Maastricht criterion of 60%. The spread between French and German borrowing costs is at its widest since the 2012 debt crisis.

Spain's political uncertainty, linked to housing market policies and snap elections called by Prime Minister Pedro Sanchez, adds to the eurozone's challenges. Meanwhile, the US dollar remains a safe haven amid Middle East tensions, despite the US's own debt concerns.

Analysts attribute the euro's weakness to developments in France, as the fragmented financial markets in the eurozone make the region vulnerable despite a common currency. The European Central Bank's ability to maneuver monetary policy is constrained by ongoing turmoil. Expectations for ECB rate hikes have been reduced due to economic slowdown and debt risks.

Selling pressure on the euro is expected to continue unless structural problems are addressed and political tensions ease. Analysts believe another debt crisis is unlikely and that France won't face bankruptcy, but they doubt the euro will strengthen against the US dollar soon. ING Germany's chief economist, Carsten Brzeski, has highlighted France's political instability, which threatens the bloc's economic stability. He calls for action from the European Commission and the ECB. Chris Turner from ING suggests that the euro/US dollar exchange rate will remain between 1.10-1.15 over the next two quarters, influenced by the Federal Reserve's stance and rising bond yields. A fiscal consolidation program in France could mitigate further euro losses, while US policies post-midterm elections will play a crucial role in determining future exchange rates.