STORY: French stocks tumbled, particularly banks, and the country’s bonds fell on Tuesday.
That’s as France’s minority government looked increasingly likely to be ousted next month.
Three main opposition parties said they would not back a confidence vote which Prime Minister Francois Bayrou announced for September 8 over his plans for sweeping budget cuts.
Jean Daniel Levy is a political analyst:
“Unless Francois Bayrou is confirmed in office – which is a hypothesis today that appears unlikely – unless he is confirmed, we will enter a new phase which will be a phase of destabilisation and with consequences from an economic point of view, from a social point of view, from the point of view of France’s image on the international stage, from an investment point of view.”
France’s blue chip CAC40 index was down over 2% in morning trade.
Banking giants BNP Paribas and Société Générale were each down more than 6%.
France’s 10-year government bond yield rose around 4 basis points in early trading to its highest since March.
Analysts had anticipated a return in French political risk in the autumn.
The government is trying to secure support for steps to improve France’s fiscal position.
But Monday’s developments came as a surprise.
If Bayrou loses the confidence vote in the National Assembly, his government will fall.
President Emmanuel Macron could then name a new prime minister, ask Bayrou to stay on as head of a caretaker government, or he could call a snap election.