The French stock market tumbled on Monday, the euro fell and investors drove France’s borrowing costs to near record levels after Prime Minister Sébastien Lecornu stepped down after less than a month in office.
The surprise resignation of Mr. Lecornu, the third prime minister to quit in less than a year, deepened fears that France was becoming increasingly ungovernable and unable to tackle a looming financial crunch.
The benchmark CAC 40 stock index in Paris slumped 2 percent, while the spread between the yields of French and German government debt, which reflects investors’ perceived risk of lending to France, widened to a near record high. Investors pushed the yield on France’s 10-year bond to 3.57 percent, close to a 14-year high. The euro dropped 0.6 percent against the dollar.
The resignation intensifies the turmoil engulfing the European Union’s second-largest economy, behind that of Germany. Mr. Lecornu was supposed to present a budget on Tuesday to tackle an alarming surge in France’s debt and deficit. Now, those efforts have been set back yet again.
Salomon Fiedler, an analyst at Berenberg Bank, wrote in a note to clients, “This further increases the risk that France’s fiscal troubles will remain unresolved and that economic policies will become less growth-friendly.”
“The French economy has turned from outperformer into the eurozone’s main laggard,” he added.
France has been in the throes of fiscal and political uncertainty since Mr. Macron called snap parliamentary elections in mid-2024, a political gamble intended to stem the rise of the far-right National Rally party.
That maneuver backfired, leading to a deeply divided Parliament. Three prime ministers have been ousted from power since then, after failed attempts to address the deficit with sharp spending cuts.
Mr. Macron has said that he will not hold new parliamentary elections, but his apparent inability to keep a government together may force him to call a vote later this year or in early 2026, analysts said.
Mr. Macron is likely to appoint a new technocratic prime minister to try to push through a budget for next year. In a more extreme case, Mr. Macron could heed the mounting calls on Monday from opposition parties to resign and bring forward a presidential election scheduled for April 2027.
The latest crisis was ignited less than 12 hours after Mr. Lecornu named a cabinet that included a fateful twist: the appointment of France’s former finance minister, Bruno Le Maire, as defense minister.
Mr. Le Maire, who held the finance post for seven years, was cycled out of the government when Mr. Macron dissolved Parliament. The Republicans, a center-right party whose support Mr. Lecornu needed, had blamed Mr. Le Maire for piling on debt while he was finance minister and were outraged to see him return to a cabinet post.
Mr. Lecornu was the latest prime minister to try to prioritize addressing France’s unraveling finances. But with warring political factions on the left, right and center of Parliament all digging in on their positions, he had no clear majority to pass a belt-tightening budget that might have assuaged nervous investors.
Two nationwide demonstrations over the past month featured raucous protesters demanding that the government raise taxes on the ultrarich, roll back a recent increase in the official retirement age and halt a rise in military spending.
After years of outsize government spending and falling tax receipts, France’s budget deficit reached 168.6 billion euros, about $198 billion, or 5.8 percent of its economic output, in 2024. The deficit is the country’s largest since World War II and well above the 3 percent limit set by the European Union.
France’s debt exceeded €3.4 trillion in September, one of the largest burdens among eurozone countries. The country’s sovereign debt rating was downgraded twice after Mr. Macron appointed Mr. Lecornu prime minister in early September, with one major rating company warning of “increased fragmentation and polarization of domestic politics.”
If nothing is done, interest payments will become the French budget’s biggest expense in four years.
France’s biggest banks, which hold large amounts of French sovereign debt, were pummeled on Monday, with shares in BNP Paribas, Société Générale and Crédit Agricole down sharply.
Liz Alderman is The Times’s chief European business correspondent, writing about economic, social and policy developments around Europe.
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