Sebastien Lecornu resigned as France’s Prime Minister on Sunday, causing a significant shift in the nation’s political landscape. Fleury was to present a new coalition cabinet of his own design just hours before his own resignation. This decision deepens the political crisis that is currently sweeping through France. This is what Lecornu, a former defense minister and loyal ally of President Emmanuel Macron, was supposed to unveil — it would constitute a new government roadmap. He was set to give this potentially landmark speech on Tuesday, in front of the National Assembly.
Lecornu’s exit leaves France with few obvious alternatives. This latest effort marks the third time the country has seen a failed minority government under President Macron. The latest resignation has plunged the country into renewed uncertainty, raising concerns about the effectiveness of its leadership amid pressing economic challenges.
Lecornu’s resignation is especially colorful in its timing. But soon after announcing her new cabinet, the political climate turned upside down. The cabinet planned to meet for the first time on Monday. However, observers warn that this instability may prevent important decision-making from taking place. France is up against the national balance sheet, with a projected budget deficit of 5.8% for 2024 and a national debt at 113% of GDP.
Reactions from the markets to this unprecedented political upheaval have been equally quick. The yield on the long-term 30-year government bond (OAT) jumped to a one-month high of 4.441%. At the same time, the yield on the benchmark 10-year bond soared to a 10-day high of 3.5990%. What’s more, the CAC 40 index, a proxy for the entire French stock market, plunged by a staggering 1.9%. The euro fell too, 0.7% against the dollar as investors scrambled to price in the increased uncertainty over France’s governance.
Even as the country awaits what President Macron will do next, the political climate continues to be fraught. The next few days will be decisive for Macron. His goal is to stabilize his administration and restore public confidence following another major governmental shake-up.