The French bond market remained relatively calm after Sunday’s by-election, which handed a surprise victory to the left-wing New Popular Front alliance. No party or coalition won an outright majority, leaving France facing a hung parliament.

The spread between the yield on 10-year French and German bonds was around 70 basis points on Wednesday, down from a 12-year high of 85 basis points reached on June 28 — and up from 49 basis points before French President Emmanuel Macron shocked the country by calling an early election. French debt historically carries a premium over Germany’s, but the spread has reached levels not seen since Europe’s debt crisis in the early 2010s.

Bond yields move inversely with prices and reflect changes in the cost of borrowing for the government, which also indicates long-term investor confidence in the economy.

Roche, CEO of Quantum Strategy, said market observers could expect the spread between French and German sovereign debt to “explode” to 120 basis points, given that the new French government is unlikely to cut the country’s budget deficit to comply with European Union regulations.

“But nothing really happened. Now, I think it will happen,” Roche told CNBC’s “Squawk Box Europe” on Tuesday.

“This will happen when it dawns on us that in fact the political paralysis in France is the economic paralysis in France, the economic paralysis in France means that France will be on a trajectory that is in direct contradiction to its actions in Europe,” he said.

In a note Sunday, Roche recommended shorting French government bonds versus German bonds. A short is a bet that the asset price will fall.

According to Roche, the French National Assembly and its various factions, as well as Macron, are now ready for a long political struggle that will lead to a lack of economic leadership.

In addition to the growth outlook, a key factor for investors is France’s high budget deficit and high public debt-to-GDP ratio of 110%. The European Commission last month warned France and other countries that they were violating EU fiscal rules.

“In the end, it will come back to us with the euro. And honestly, in comparison, Italy and France will look like an angel, although they are not angels, and France will look like devils,” he said.

Meanwhile, the political stalemate will give the far-right Rassemblement National (National Assembly) party an opportunity to criticize, allowing its long-time leader Marine Le Pen to prepare to run for president, Roche said.

He added that, more broadly, any “populist, self-centered, narcissistic government” in France would mean “Europe is going nowhere.”

“All the big projects that need community-based financing will not get community-based financing, and I’m talking about enlargement, I’m talking about green projects, I’m talking about rebuilding Ukraine. There are about seven major pillars that are suddenly going absolutely nowhere, which is catastrophic for Europe,” Roche told CNBC.

Trichet, a former governor of the Bank of France, was more optimistic that the current crop of politicians would find a way to continue coalition talks together. He suggested there would be no stalemate and no risk of a national or broader debt crisis in Europe that would require intervention by the European Central Bank.

The leftist New Popular Front’s programme was “very dangerous” from an economic point of view, but since it failed to win a majority, any risks arising from it are now a “theoretical scenario” that “will not materialise”, Trichet said.

“If this remains a hung parliament for a long period of time, of course, you can’t move freely… my assessment is that after some time there will be negotiations, when it is proven that none of the current groups are capable of leading the country,” Trichet told CNBC’s Charlotte Reed, raising the possibility of a “coalition of ideas.” The best-case scenario would involve decision-making by the government’s right wing, Les Républicains, the government’s left wing, the Parti Socialiste and others, he added.

“We cannot remain in a country like France without a government or with a government that does nothing,” Trichet said.