France on the Brink: Lecornu Resignation Sparks Market Chaos, Budget Crisis Deepens
Outgoing French Prime Minister Sebastien Lecornu blamed political parties’ intransigence for his resignation during a public address on Monday morning, an hour after announcing he would no longer head the government.
“Each political party wanted the other political party to adopt its entire program,” he said in a speech in the courtyard of Matignon Palace, the Prime Minister’s headquarters.
Lecornu resigned just a day after naming his government and less than a month into office. Accordingly, his cabinet lasted only 14 hours — plunging the country into a deep political crisis.
As for President Emmanuel Macron, the National Rally party is calling on him to either call for new snap elections or resign. The France Unbowed also asked for Macron’s departure.
“There can be no return to stability without a return to the polls and the dissolution of the National Assembly,” National Rally leader Jordan Bardella said after Lecornu resigned.
Mathilde Panot of the France Unbowed, said: “Lecornu resigns. 3 Prime Ministers defeated in less than a year. The countdown has begun. Macron must go.”
Political Unrest Shakes Market
In a parallel development, French markets fell on the news, with the Cac 40 stock index down 2 per cent, led by declining bank shares. A fall in government bond prices pushed up the country’s 10-year borrowing costs by 0.05 percentage points to 3.56 per cent. The euro fell 0.6 per cent against the dollar, according to The Financial Times.
“The political problems mean none of the issues that are haunting France will be tackled,” said Peter Schaffrik, global macro strategist at RBC Capital Markets, referring to France’s ballooning government debt pile.
Schaffrik said the outlook for French assets remains “murky to bad”.
Chris Beauchamp, chief market analyst at IG, said investors were blindsided by the news this morning, especially in the equity market.
“To lose one prime minister is unfortunate, but four looks like a major crisis,” he wrote in emailed comments. “The real worry will be that the procession of prime ministers unable to govern will at some point force the resignation of President Macron.”
“It certainly makes people wary about European assets at this point because of the uncertainty and the spillover effects that go from France just being unable to find its way out of this malaise,” he added.
