France’s financial markets slipped on Monday after Prime Minister Sébastien Lecornu resigned, deepening the country’s political turmoil. The Paris CAC 40 index fell 1.5 percent, with bank shares hit hard because of their large holdings of French sovereign debt. The yield on 10‑year French government bonds rose to 3.61 percent before easing to 3.57 percent, signaling higher borrowing costs.
The surge in yields reverberated through the banking sector. Shares of major banks—BNP Paribas, Société Générale and Crédit Agricole—dropped by more than four, five and four percent respectively. Market analyst Alexandre Baradez of IG France linked the decline directly to Lecornu’s resignation, which prompted investors to reassess risk.
The spread between French and German bonds, a key gauge of France’s credit risk relative to Germany, widened to 89 basis points, its highest level in nine months. Lecornu, appointed by President Emmanuel Macron just last month, has left the political arena uncertain. Investors fear a domino effect on economic and fiscal policy, especially concerning next year’s austerity budget. His predecessors, François Bayrou and Michel Barnier, were previously ousted by the legislative chamber over the same spending plan, underscoring the challenges ahead.
France’s current political climate is marked by deep divisions, with Lecornu’s cabinet facing fierce criticism across the spectrum. As the country navigates this uncertain period, investors and analysts will watch developments closely for their potential impact on the economy. The rise in borrowing costs and the fall in bank shares highlight the importance of political stability for maintaining investor confidence and a healthy economy.
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