France's political situation has fallen into a vicious cycle, with Macron's new government facing immediate prime ministerial resignation just after its formation, exacerbating the ongoing political stalemate. Is it impossible to restore stability without new elections and dissolving the National Assembly?
French Prime Minister Sébastien Lecornu resigned on Monday, just one day after President Emmanuel Macron announced his new cabinet, deepening France's political crisis.
The Prime Minister resigned less than 24 hours after Macron announced the new government lineup, which retained most senior members from the previous cabinet. This decision angered opposition parties seeking change, but surprisingly, Bruno Retailleau, the reappointed Interior Minister and leader of the center-right Republicans, also criticized the cabinet selections, saying they failed to "break" with the past.
As investors prepared for more political uncertainty, French government bonds fell in response. The 10-year French bond yield rose 9 basis points to 3.6%. This widened the spread between French and German bonds—a key measure of fiscal risk—to over 89 basis points, reaching the highest level since the end of 2024.
Socialist Party leader Olivier Faure stated that Macron's party is "collapsing" and the new government already lacks "legitimacy." The Socialist Party holds potentially crucial voting power in parliament. Shortly before Lecornu announced his resignation, he said: "We are witnessing an unprecedented political crisis."
Lecornu faces the same thorny issue as his two predecessors: he must pass a budget through a divided parliament that includes unpopular spending cuts and tax increases necessary to control the eurozone's largest deficit.
Lecornu's predecessor François Bayrou was forced to resign last month after losing a no-confidence vote over his plans to drastically cut next year's deficit. In December, Bayrou's predecessor Michel Barnier was also removed due to proposed budget cuts.
Before Lecornu's resignation, Vincent Juvyns, Chief Investment Strategist at ING Groep NV in Brussels, said in an interview: "The current situation is pushing us toward new elections, and in that case, I expect the spread to rise and test 100 basis points."
Macron and Lecornu's choices for senior positions in the new government did not reflect the change of direction demanded by opposition parties.
After Lecornu announced his resignation, National Rally Chairman Jordan Bardella told reporters: "It is impossible to restore stability without new elections and dissolving the National Assembly."
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