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France’s borrowing costs have risen above those of Greece for the first time, as investors fret that Michel Barnier’s government could fail to pass a belt-tightening budget.

The 10-year yield on French government debt briefly reached 3.02 per cent in early trading on Thursday, crossing above the 3.01 per cent yield demanded by lenders to Greece, before switching back.

The crossover reflects an upheaval in the perceived riskiness of Eurozone borrowers and underscores investors’ concern about France’s political and fiscal outlook at a time when Barnier’s minority administration is struggling to push through €60bn of tax increases and spending cuts.

“Looks like French politics are about to collide with the bond market,” said Andrew Pease, chief investment strategist at Russell Investments, as he suggested that market turmoil would eventually force politicians to accept fiscal discipline. “I think we know who wins.”

Under intense pressure from opposition parties, Barnier could face a crunch no-confidence vote as early as next week. On Thursday he made a major concession to Marine Le Pen’s far-right party by abandoning a plan to raise electricity taxes, in a bid to convince it not to bring down his months-old government.

“We can still be responsible and work together to improve the budget . . . or there is another road of uncertainty and . . . leaping into the budgetary and financial unknown,” said finance minister Antoine Armand, who also sought to dismiss any comparison between the French and Greek economies.

“France is not Greece,” he added on BFMTV. “France has . . . far superior economic and demographic power which means it is not Greece.”

French borrowing costs remain well below levels that would signify a bond market crisis, and 10-year bond yields fell back to 2.95 per cent later on Thursday, compared with Greece’s 2.99 per cent. France’s spread above German yields — a key measure of the riskiness of French bonds — has dropped back to 0.82 percentage points from a 12-year high of 0.9 points earlier in the week.

But Thursday’s moves underscore how investors are reclassifying Paris as one of the Eurozone’s riskier borrowers.

France’s government bond market endured its worst bout of selling in two years during the five trading days to Tuesday, according to flow data from BNY Investments. Geoff Yu, senior markets strategist at BNY, said it was the “most concentrated round of selling . . . since the height of the European energy crisis in late 2022”.

Greek bond yields have also fallen markedly as the country’s economy has recovered since its bailout during the 2012 crisis. Last year, Athens’ credit rating was lifted to investment grade for the first time.

Hedge funds have also built up bigger bets against French debt than during the nadir of the 2008 global financial crisis, according to data from S&P Global Market Intelligence.

Bonds out on loan — a measure of hedge fund short selling, or betting on a falling price — are now €99.7bn, compared with just under €85bn in September 2008.

Since the government lacks a majority in the assembly, it will probably have to use a constitutional mechanism to override lawmakers, which in turn would allow the opposition to call a no-confidence vote.

The French budget’s fate and that of Barnier’s administration remain largely in the hands of the far-right RN party, which is the biggest single party and a key voting bloc in the National Assembly.

Despite Barnier’s concession on electricity, the RN kept up pressure on the government and threatened to vote to bring it down if its demands were not met.

“There are still difficulties. It’s Thursday. He has until Monday,” Le Pen warned in Le Monde newspaper on Thursday night.

RN party leader Jordan Bardella hailed the government’s climbdown on the electricity tax as a “victory”.

“Other red lines still remain,” Bardella added in a post on X, reiterating the party’s calls for protecting the purchasing power of the public, particularly retirees and a “serious crackdown” on migration and crime. 

Concessions the government has made to the proposed budget in recent weeks may render impossible its goal to bring back the deficit to 5 per cent of national output by the end of 2025.

France overshot its deficit target for this year and will finish at above 6 per cent of GDP — far above the EU limit of 3 per cent of GDP.

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Mexican President Claudia Sheinbaum on Thursday ruled out a trade war with the United States after speaking with President-elect Donald Trump, who has threatened stiff tariffs to halt illegal immigration.

“There will not be a potential tariff war,” Sheinbaum, who has been scrambling to head off threatened tariffs of 25 percent on Mexican goods, told a daily news conference.

She was speaking a day after a telephone call with Trump, who has threatened to slap tariffs on Canada and China in addition to Mexico over illegal immigration and drug trafficking.

After their call, Sheinbaum and Trump offered differing accounts of what they had discussed regarding migration.

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Trump claimed that Mexico’s left-wing president had “agreed to stop migration through Mexico, and into the United States, effectively closing our Southern Border.”

Sheinbaum later said she had discussed a policy already in place, and denied Trump’s version again Thursday.

“I can assure you… that we would never — we would not be capable — of proposing that we were going to close the border,” she said, adding: “Of course we do not agree with that.”

She said she had assured the Republican leader that a caravan of migrants assembled in southern Mexico, over which Trump had expressed concern, “will not reach the northern border,” pointing to Mexico’s “strategy” of preventing such convoys crossing its territory.

She said that after that, the talks had no longer revolved around the threat of tariff hikes.

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Writing Wednesday on X, Sheinbaum said she and Trump had also discussed “strengthening collaboration on security issues” as well as “the campaign we are conducting in the country to prevent the consumption of fentanyl.”

Trump caused panic among some of the biggest US trading partners on Monday when he said he would impose tariffs of 25 percent on Mexican and Canadian imports and 10 percent on goods from China.

He accused them of not doing enough to halt the “invasion” of the US by drugs “in particular fentanyl” and undocumented migrants.

Mexican Economy Minister Marcelo Ebrard warned Wednesday that some 400,000 jobs in the United States could be lost if Trump followed through on his threat.

He cited a study based on figures from US carmakers that manufacture in Mexico.

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Sheinbaum said Thursday that further conversations were planned between her government and Trump’s transition team before his January 20 inauguration.

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At an FT event a few years ago, Microsoft’s co-founder Bill Gates was asked what painful lessons he had learnt when building his software company. His answer startled the audience back then and is all the more resonant today.

Gates replied that in his early twenties he was convinced that “IQ was fungible” and that he was wrong. His aim had been to hire the smartest people he could find and build a corporate “IQ hierarchy” with the most intelligent employees at the top. His assumption was that no one would want to work for a boss who was not smarter than them. “Well, that didn’t work for very long,” he confessed. “By the age of 25, I knew that IQ seems to come in different forms.” 

Those employees who understood sales and management, for example, appeared to be smart in ways that were negatively correlated with writing good code or mastering physics equations, Gates said. Microsoft has since worked on blending different types of intelligence to create effective teams. It seems to have paid off: the company now boasts a market value of more than $3tn and will celebrate its 50th birthday next year.

Gates may have learnt that lesson early. But while many of his fellow US tech billionaires share his original instinct about the primacy of IQ, few appear to have reached his later conclusion. There is a tech titan tendency to believe that it is their own particular form of intelligence that has enabled them to become wildly successful and insanely wealthy and to champion it in others.

Moreover, they seem to think this superior intelligence is always and everywhere applicable. 

The default assumption of successful founders seems to be that their expertise in building tech companies gives them equally valuable insights into the US federal budget deficit, pandemic responses, or the war in Ukraine. For them, fresh information plucked from unfamiliar fields sometimes resembles God-given revelation even if it is commonplace knowledge to everyone outside their bubble. One young American tech billionaire, a college dropout who had just returned from a trip to Paris, once asked me with wide-eyed wonder whether I had heard about the French Revolution. It was incredible, apparently.

Inevitably, this leads to questions about the fungibility of Elon Musk’s IQ given his omnipresence in the US economy and now politics. The South African-born entrepreneur is blessed with an exceptional form of intelligence and clarity of vision that commands respect, even from his fiercest competitors. “I think he’s a fucking legend,” the chief executive of one rival electric vehicle company told me, even though he was personally appalled by the ways in which Musk had used his social media company X as a propaganda tool.

Although Musk excels at building cool cars and rocket ships, his personal brand extension into social media is flailing and he is facing a user and advertiser exodus at X. Still, Musk used the $44bn megaphone he bought to help elect Donald Trump. In turn, the incoming US president has now invited the “super genius” Musk to become one of two co-heads of the planned Department of Government Efficiency. 

To cut bureaucracy, Musk is advertising for “super high IQ small-government revolutionaries willing to work 80+ hours per week on unglamorous cost-cutting”. Musk has already said he would like to axe three quarters of the federal government’s 400 departments. “99 is enough,” he posted.

These days, Musk prefers to troll Gates rather than listen to him. Yet he might still reflect on Gates’s painful lesson: the smartest people in one field do not always have the best ideas in others.

No doubt there is massive bureaucratic waste to be cut, but it will take many different types of intelligence to understand all the public benefits, competing agendas and conflicting interests surrounding government spending. 

There is also a certain irony in tech billionaires trumpeting superior human intelligence when they are also developing AI that may one day overtake it. Google’s co-founder Larry Page labelled Musk a “speciesist” for defending human intelligence so doggedly in the face of advancing technology. 

Naturally, Musk is working on a solution: he plans to upgrade our biological wetware using electronic brain implants developed by his company Neuralink to merge human and machine intelligence.

That prospect will terrify many but may, in a different way, prove the ultimate test of whether human IQ is fungible.

john.thornhill@ft.com