EUROPEAN INFLATION: German State-Level Details Point Towards Lower Services

SONIA FIX - Source: BBG/ICE

• 1M 4.53320 -0.0064
• 3M 4.48380 -0.0055
• 6M 4.39940 -0.0058
• 12M 4.28240 -0.0027

• MNI: US MBA: MARKET COMPOSITE -2.0% SA THRU JAN 24 WK

The centre-left Socialist Party (PS) has set out the conditions that could see it return to the negotiating table with the gov't on the subject of the 2025 state budget. The PS confirmed it had suspended cooperation after comments from PM Francois Bayrou made on 27 Jan referring to a "feeling of flooding" with regards to immigration (see 'FRANCE: Greens & PS Criticise PM's Immigration Comments As Budget Talks Halted', 1005GMT). Le Monde reports that the PS could take part in budget talks if the PM walks back his comments, an immediate increase in the minimum wage, and a commitment not to touch state medical aid (AME) for illegal immigrants. 

• Gov't spox Sophie Primas says that the budget talks must not be taken "hostage". Primas: "This is the number one issue for our country. We must reach an agreement."
• The demand on AME made by PS Mayor of Nantes, Johanna Rolland, could cause significant issues for the gov't. AME allows those without residency permits to receive medical treatment, but the budget draft passed by the Senate cut its budget by EUR200mn.
• Should the gov't seek the restoration of AME funds it risks a censure motion being moved by the far-right Rassembelement National (RN). Parties of the leftist New Popular Front alliance have proved reluctant to back RN censure motions, but the far-left La France Insoumise could support such a motion given its staunch anti-gov't stance. It would also put the nominally pro-gov't conservative Les Republicains in a difficult position.