If there is one country that can ill-afford a prolonged Strait of Hormuz closure, it is France, the Eurozone’s second-largest member country. Even before the Strait’s closure, France had unsustainable public finances. Those finances were proving difficult to correct in the context of its sclerotic economy, its fragmented politics, and its being stuck in a Euro straitjacket. The energy and fertilizer price spike resulting from the Strait’s closure will substantially exacerbate France’s public finance problem. In turn, that raises the real risk of another round of the Eurozone sovereign debt crisis, especially given the French government’s high dependence on external borrowing to finance its gaping budget deficit.
