Greece? Been there. Ireland? Done that. Portugal? Got the T-shirt. For the past year, countries sharing the euro have been going bust one by one.

So where’s next? Plenty of people will point the finger at Spain. Some at Italy. A few single out Belgium, a country with high debts, and no government.

But they should be looking somewhere else: France.

It is increasingly politically unstable, its debt position is getting worse all the time, it is losing competitiveness against Germany, and it shows little willingness to change. Those are all good reasons for the bond markets to make France the next battleground. But the yield on France’s 10-year bond is still hovering quietly at about 3.6 percent.

There isn’t, of course, a shortage of candidates for the next leg of the euro-area’s rolling crisis of confidence. Spain experienced a property bubble every bit as extreme as Ireland’s, and has one of the biggest budget deficits in the euro area. Italy has a legacy of government debt almost as bad as Greece’s, and has struggled to grow since joining the single currency. The same is true of Portugal. Belgium has just marked a year without a government, a world record in peacetime: There isn’t much chance of it getting a grip on the budget deficit while the country can’t even agree on who is in charge.

Amidst all that, France has managed to slip off the radar. It is Europe’s second-biggest economy and still a prosperous one, even if its gross domestic product has expanded only 1.6 percent on average over the past two decades.

“It won’t be long before bond investors turn to France after they have finished with Portugal and Spain,” Xavier Rolet, the chief executive officer of London Stock Exchange Group Plc, told the Independent newspaper in December.

There are four reasons to think it may be next in line.

First, it is entering politically dangerous territory. Next year’s presidential election promises to be dramatic. The polls suggest President Nicolas Sarkozy will struggle to make the second-round run-off, and may well be relegated to third place by the extremist National Front, led by Marine Le Pen. Only one poll in the last seven weeks has shown Sarkozy defeating Le Pen for the run-off.

The interesting point is this: Le Pen is a fierce critic of the euro. Spain and Italy don’t have popular politicians arguing the case for bringing back national currencies. France does. Her chances of winning power aren’t much better than they were for her father, Jean-Marie, who once led the party. But all it will take is a whiff of victory for the bond markets to take fright. After all, a Le Pen victory could easily lead to the restoration of the franc, followed by a devaluation. You wouldn’t want to own French bonds if there was any possibility of that happening.

Second, France’s debt position is getting worse all the time. In 2010, the nation ran the fifth-biggest budget deficit in the euro area, at 7 percent of GDP. It was beaten only by Greece, Portugal, Ireland and Spain ― hardly great company. Its stock of outstanding government debt hit 81 percent of GDP in 2010. That figure will reach 90 percent this year and 95 percent in 2012, according to London-based consulting firm Capital Economics. Italy has more outstanding debt ― 119 percent of GDP in 2010 ― but it isn’t adding to the pile the same way France is. What the markets really look at is the direction you are traveling in ― and in the case of France, it isn’t good.

Three, France is losing competitiveness. The core problem for all the countries struggling with the single currency is that they can’t stay competitive with Germany. That is certainly true of France. German labor costs shrank 0.7 percent in the fourth quarter, while in France they rose 1.1 percent. The difference was even wider in the previous two quarters. The gap isn’t massive in any single year, but enough to make France steadily less competitive against its neighbor to the east.

Four, it is reluctant to change. Sarkozy came to power promising to shake up the economy. He delivered little. At the next election, he will face a challenge from the extreme, anti-euro right. At the same time, the most likely Socialist Party candidate, International Monetary Fund Managing Director Dominique Strauss-Kahn, will be collecting the center voters. In that contest, no one will promise tough action to control the deficit, hold back wages or liberalize the economy. Spain and Italy may have bigger debt problems, but the Spanish are working hard to improve their finances and the Italians are at least keeping their debts under control even if they aren’t doing much to become more competitive. France isn’t doing either.

There isn’t much sign of the bond markets turning on France yet. The country can still borrow on similar terms to Germany. And there is still time to turn things around. A reduction in the deficit this year or next would make things look better.

But it is hard to believe that the euro crisis will end with the bailout of Portugal. Other countries are going to get caught in the crossfire. When you look around for the next candidate, France has what it takes to be the next blowup.

By Matthew Lynn

Matthew Lynn is a Bloomberg News columnist and the author of “Bust,” a book on the Greek debt crisis. The opinions expressed are his own. ― Ed.

(Bloomberg)