France is once again facing a political and financial storm as Premier François Bayrou’s minority government edges toward collapse, triggering panic in markets and uncertainty for investors. Bayrou’s decision to call for a confidence vote on Sept. 8 has raised alarms, especially as the opposition remains firmly against his unpopular budget cuts. The move revived fears of a new government vacuum, less than a year after Michel Barnier’s administration crumbled in December 2024.
Markets responded with immediate turbulence. The CAC 40 index fell 1.6% on Monday, the day Bayrou announced the confidence vote, followed by another 1.5% drop on Wednesday. Banking giants BNP Paribas and Société Générale lost more than 6% of their value, while France’s 10-year bond yield spiked to 3.53%, its highest since March. With public debt at 113% of GDP and a budget deficit of 5.8%, France’s economic fragility is now colliding with its chronic political instability. Experts warn that this crisis could mark a decisive turning point, rooted in President Emmanuel Macron’s decision to dissolve the National Assembly in June 2024 after his coalition’s defeat in the EU elections.
Bayrou’s 2026 budget plan, unveiled in July, aimed to cut the deficit from 5.4% this year to 4.6% by 2026 and 2.8% in 2029, with €43.8 billion in savings from harsh measures, including spending and hiring cuts, frozen tax brackets, pension and social security freezes, and even eliminating two public holidays. Yet, the plan has united opposition across the political spectrum. According to economist Salomon Fiedler of Berenberg, Bayrou is highly likely to lose the vote as neither the right nor left is willing to back him. Should his government fall, Macron would face a tough choice between appointing another premier or calling early elections again. But with the economy expected to grow only 0.8% this year, and political fractures deepening, France risks sliding into both political paralysis and financial stalemate.
