"Contagious" for Europe: France without a government and without a parliament

The resignation of Sébastien Lecornu from the post of prime minister of France on October 6 marked the record shortest premiership in the history of the Fifth Republic - he had been in office for 27 days. The news that Lecornu submitted his resignation to President Emanuel Macron and received a positive response came hours before the new government was officially announced. No political force was ready to support the new cabinet.

Since 2017, after Emmanuel Macron became President of France, Sébastien Lecornu has successively held key positions in different governments. First, he was appointed Secretary of State at the Ministry of Ecology and Sustainable Development. In October 2018, he became Minister for Local Authorities in Edouard Philippe's cabinet. In 2020, he became head of the Ministry of Overseas Territories in the government of Jean Castex. From May 20, 2022, he served as Minister of the Armed Forces and held the position for four cabinet changes. In September 2025, he was appointed Prime Minister of France by President Emmanuel Macron.

Lecornu stepped down as head of government because all political forces refused to support his list of ministers in advance. After consultations and open comments in the press, it became clear that even his political supporters would be against the prime minister's candidates at the presentation of his government in the National Assembly on Tuesday.

It is from the side of allies from the "party of power" that the main blow came. The party of Republicans, on which Emmanuel Macron relies in Parliament, strongly opposed the candidacy of Bruno Le Maire for the post of Minister of Defense. Previously, the latter had served as Minister of Economy and his work in this position did not arouse support.

The "Rassemblement Nationale" - Marie Le Pen's movement - had also formed its decision by Monday, and Lecornu's answer was "no". The president of the Rassemblement National, Jordaan Bardella, said that the right-wingers were ready to immediately raise the issue of a vote of no confidence in Lecornu's cabinet. They justified their position by the fact that the Lecornu government does not change anything in its work compared to its predecessors.

The right-wingers especially emphasized the fact that 12 out of 18 people were transferred from the previous cabinet. This also caused discontent within the pro-presidential association "Together for the Republic": they openly criticized Lekornu for the fiddling with the division of ministerial posts.

The Socialists, through their leader Olivier Faure, demanded that Lecornu promise to immediately suspend the pension reform - the 2023 reform raised the minimum retirement age from 62 to 64. A plausibly impossible demand precluded their support for the new government.

The first assessments of the resignation of the prime minister of the unapproved government are negative. Le Monde wrote about the "symbol of chronic instability" of the executive branch. The Financial Times noted that France is left without a stable government at a time when it has to defend the budget and European policy.

The markets' reaction to the news of Lecornu's resignation - a fall in the CAC 40 index and a rise in yields on French debt securities - became a marker of investor anxiety. In the first hours of trading on Monday, the CAC 40 was losing almost 2%, to a level of 7,900 points. The euro weakened by 0.6%. The strongest in the French index were banks: Société Générale - minus 6.6%, BNP Paribas fell by 5.5%, Crédit Agricole - by 5.4%. The banking sector is traditionally sensitive to the rising risk premium on French debt, which on Monday rose to its highest since January. In the rest of Europe, the decline in the first hours was moderate: the Euro Stoxx 50 retreated 0.5%, while the German DAX remained generally stable. However, the third resignation of a prime minister in a matter of months this time could be "contagious" across Europe, Alexandre Baradez, chief market analyst at IG in Paris, said in an interview with Bloomberg:

The premium to German government debt on French 10-year OAT bonds is now around 87 bps. (≈0.87 p.p.) - the spread has widened to ~86.6 bps, the highest since January 2025; (in ten months, the OAT yield has risen to 3.59%).

The negative reaction of markets and politicians to Lecornuil's work on government formation is a consequence of the crisis of confidence in President Emmanuel Macron. His policy of seeking consensus on any issue and his willingness to use procedural tricks to ignore the opposition's position on key issues has already been dubbed "Macronism" in France. One of the most striking examples is the special procedure used to pass pension reform - despite millions of street protests and opposition Macron managed to pass it.

The Elysee Palace lost the dialog with the leftist parties when it did not support their demands to soften or suspend the pension reform. Consultations on the issue in 2024 have stalled. Proposals for populist measures, such as a one-time tax on large incomes and fortunes (the Zusman tax), were willing to be discussed, but without concrete draft decisions.

It is more profitable for the right-wing, especially the Rassemblement Nationale, to provoke instability and demand the dissolution of parliament and re-elections. If Parliament is unable to pass the 2026 budget, it will also play into the hands of Le Pen and Bardella, who constantly talk about the inability of Macron and his government to work in the interests of their fellow citizens. A practical consequence of the budget crisis is the refusal to index social benefits and the state's obligations to citizens.

President Emmanuel Macron said at the beginning of 2025 that he does not intend to dissolve parliament and wants to serve until the end of his term in 2027. The consequence of this tough stance is a first place in French polls, with 30-35 percent of the vote for the Le Pen/Bardelle candidate in future elections for the presidency of the Republic.

The worst that can happen now is the resignation of President Macron, but it is unlikely, says John Plassar, partner and head of investment strategy at Cite-Gestion, on CNBC he said: "I don't think he (Macron - Oninvest note) wants to do it, but it would be the worst option for the market. In my opinion, neither the Socialists nor even the extreme right in France really want to run the country now - they are just waiting for new elections."

For investors, this is a signal that France cannot change its economic policy until 2027. And after 2027 it is not clear how exactly it will be shaped.

This article was AI-translated and verified by a human editor