Faced with the “Kryra” of the two most important ratings houses (Moody’s and S&P) will be found to be over -indebted Franceat the same time today (6.10.2025) collapsed another government, that is, the one that formed by Sebastian.
French President Emmanuel Macron accepted his resignation (Although he later recalled him to stay until Wednesday, October 8, 2025). “You cannot be prime minister if the conditions are not appropriate,” Sebastian Lecorni said in a statement after his resignation. He said he was willing to compromise and “tried to find a way (…) to address issues that had led to dead ends” and to create a “road map” on a common basis. This was not possible.
The parties “continue to act as if they had all had an absolute majority in the National Assembly,” he said. Everything wanted their entire program to be accepted, which was simply not possible.
The 39 -year -old Lecorne was the fifth head of government in less than two years. Macron had just appointed him in early September. He had never served prime minister for a shorter period of time. Lekorni apparently lost the support of his government. He had presented the cabinet just last weekend after weeks of delay.
Criticism for the Council of Ministers
Most of the new ministers previously held ministerial positions and are close to Macron. The big surprise was the return of former Finance and Economy Minister Bruno Lemmer to the government: he became the new Minister of Defense on Sunday night, succeeding Lecorn himself.
Opposition parties were outraged by the new cabinet and announced proposals for censure. But there were also criticism by Republicans (LR), who previously supported the government. Their leader, for a while, for a while, Bruno Retai, said on Monday that he had a “confidence problem” with Lekorni. The appointment of Macron’s trustee, Lemmer, had been kept secret by him and did not fit the announced “rupture” with the old standards.
Shortly after Macron’s resignation, Marin Le Pen, head of the Right National Alarm (RN), and Matild Panos, head of the Leftist La France Insoumise (LFI), called on him to dismantle parliament – or resign.
Parliament reiterated its work a few days ago after his summer vacation. Negotiations on the budget are currently underway, the central issue on the French political scene for months.
Three blocks are opposed to the National Assembly: the Left, the center of Macron and the right nationalists. The Socialists were willing to support the government only if the reform of Macron’s pension system was disputed, which increased the official retirement age from 62 to 64 years. They also asked for a tax on the rich. Lekorni rejected both.
So far, Macron was at least able to rely on Republicans. But the Conservatives were outraged because, despite their support, they played a small role in the government, and Lecorni gave the Left to the budget: he wanted to introduce a mini tax to the rich, but this has now been delayed in parliament.
Republicans urge Macron to save the situation and explain what he intends to do with the last one and a half years of his term, by 2027.
What does Macron do?
Macron has not yet explained what he will do. Party leaders are currently meeting their headquarters in Paris to discuss the next steps.
There are not many alternatives. Macron could simply appoint a new prime minister and hope that the other parties, either the Socialists or the right -wing nationalists, will retreat, Le Monde writes.
The second option would be a new dissolution of the National Assembly. This is possible since July, one year after dissolving in 2024. The third would be the resignation of the president. This is the way that is gaining more and more burden on public debate. But so far, Macron, who still has a year and a half in power, is not willing to do so. According to the Constitution, he cannot re -run after two consecutive terms.
In the meantime, in the background, the parties are reconstituted. There are voices that see the unity between the conservatives and the right nationalists as a solution. Jean-Lyk Melanson, founder of LFI, wants to rally the left around him and bring back the socialists to the forefront. And Marion Maresal, a niece of Marin Le Pen, has been supporting a union of the right for years.
If that were the case, the majority in the National Assembly and a turn to the right in France would be very likely. Republicans were still discussing their new strategy today.
Purchases reacted
Immediately after the news, French government bonds declined significantly, while ten -year bond yields increased by about 0.08 percentage points, reaching up to 3.59%. This brought the yields again near the highs of mid -September, when they stood at 3.61%.
In the stock market, the top CAC 40 index fell up to 2%. Among the biggest lost bank shares such as Société Générale, BNP Paribas and Crédit Agricole, which fell up to 7%. Bank shares are considered a reflection of a country’s financial health.
Analysts see a growing chance of new parliamentary elections. “It is getting more and more difficult to appoint another prime minister who can unite MPs around a budget resolution,” said RBC Bluebay Asset Management’s Neal Mehta.
MFS Investment Management’s Peter Goves also believes that the elections are becoming more likely. This increases the risk that the right RN will win seats. In such a scenario, given the significant uncertainty between investors, risk premiums for French government bonds against German bonds could be expanded to a full percentage point, Mehta warns. On Monday, the risk premium rose to 0.85%.
Most experts agree to one point: they are not afraid of a new euro crisis. The turmoil will remain confined to France for the time being and will have little impact on other eurozone countries, Goves says.
Alexander Krüger, chief economist at Haufhäuser Lampe Privatbank, sees France’s evaluation “continuing to be shaken”, but current market development is not enough to activate the European Central Bank’s TPI emergency program.
France has a debt problem
Investors are concerned about France’s high national debt, which now amounts to more than 110% of economic GDP. France now has to pay higher interest rates in its state bonds from Greece and offer investors as well as in Italy, although French returns have increased significantly faster.
Concerns about national debt affect France’s credit rating. In September, the Fitch evaluation house downgraded France’s evaluation from “AA-” to “A+” and DBRS withdrew its evaluation from “AA High” to “AA”. The two largest evaluation houses, Moody’s and S&P, will issue their verdicts for the evaluation on October 24 and November 28 respectively.
Fitch justified the move with the budget crisis. He said there is no clear plan to stabilize debt in the coming years. Markets should now wait for it even more.
The FCAS Agreement is delayed
The ongoing political crisis also affects the cooperation between Paris and Berlin, according to Handelsblatt.
Many are at stake, especially in the defense sector. The emphasis is placed on the FCAS fighter aircraft (Future Combat Air System). So far, Germany and France have not reached an agreement. This is mainly due to the fact that the French manufacturer Dassault is pushing for a leading role in the German subsidiary of Airbus, Defense.
The speculations about the end of the prestige project are already intense. It is said that Germany and France reached an agreement until December in late August. Defense Minister Boris Pistorius (SPD) has actually wanted to meet his counterparts from France and Spain as soon as a government was formed in Paris. Berlin should wait for the time being.
The German government, however, warned against the escalation of the situation. “I have no reason to doubt that stability is also prevalent in France,” said government spokesman Stefan Cornelius. Macron must now “be given space” to form a new government. Of course, a stable France is also an important contribution to stability in Europe. Europe and Germany remain capable of acting.