France’s 10-year borrowing cost topped 5 per cent again in early Paris trading on Thursday, a day after touching that level for the first time since 2002, as the country recovers from its worst urban riots in years and braces for more clashes to come.

Analysts expected market pressure to persist in the near term amid uncertainties at home and abroad, but noted that the situation remained far from turning into another euro-zone crisis.

The spread between 10-year French and German bonds widened to 1.57 percentage points on Wednesday, edging towards the recent peak seen on October 2, when the market last fretted over France’s ability to pass its 2027 budget amid political deadlock.

“Markets are adjusting very rapidly to sentiment, and I think sentiment will deteriorate,” said Stephane Colliac, senior economist at BNP Paribas. “What we observe on the market is a clear demonstration of its consequences.”Polls conducted before last weekend’s riots already showed that French people were not optimistic about the future, with the latest Banque de France business climate indicator pointing to an increase in uncertainty sentiment. The unrest was likely to have a further negative impact, according to Colliac.

“Over the next weeks, it is likely that we will remain in this landscape,” he said. “In terms of rates and spread, it is very likely that we will see these kinds of levels again.”Further protests have already been called for this Saturday and the following weekend, with a general strike set for November 5.

Moody’s is set to review France’s sovereign credit rating on Friday, with a negative outlook already attached to it.

An initial estimate from research firm Morningstar published on Tuesday put the insured cost of the latest unrest at below €1.2 billion (US$1.35 billion). But Charlotte de Montpellier, senior economist at ING, said in a note published on the same day that past experience suggested the true cost would likely exceed insured losses.

A report by the French National Assembly after the 2018 yellow vest movement found that while insurers paid out €217 million for property damage, the unrest cost shopping centres €2 billion and hotels, restaurants and cafes €850 million, with a 2.5 per cent drop in tourism numbers during the first quarter of 2019. It also took away 0.1 percentage points off France’s gross domestic product growth in the last quarter of 2018.

The unrest, together with rising borrowing costs and weaker confidence, was likely to place further downward pressure on France’s economic outlook, de Montpellier wrote. Growth could come in below the already modest projection of 0.3 per cent in 2026 and 0.6 per cent in 2027, Montpellier added.

The situation is also complicating efforts by France’s hung parliament to pass the 2007 budget, as opposition parties blame the government for its handling of the unrest. That political uncertainty was a key driver of the latest rise in yields, according to Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at French investment bank Natixis.

Nevertheless, Colliac said both the government and the opposition parties had strong incentives to ensure a budget was passed ahead of next year’s elections.

“What is quite reassuring is that the other [non-government] parties in parliament, even if they may not like the budget, will need one in place in order to modify it after the elections, whoever wins,” he said.

France’s troubles were also unlikely to trigger another euro crisis any time soon, according to Garcia-Herrero. The European Central Bank had ample manoeuvring room and France’s economy was far larger than Greece’s, meaning that swift interventions would take place if needed.

Greece triggered the euro crisis in late 2009 when it revealed it had under-reported its massive government deficits, shattering market confidence and forcing the country to accept multiple international bailouts tied to severe economic austerity.