Another week, another act in France’s long-running drama of self-inflicted instability. Prime Minister Sébastien Lecornu has resigned — less than a month after taking office — leaving President Emmanuel Macron scrambling to find yet another caretaker capable of steering a government that has forgotten how to govern.
Markets, never fond of melodrama, have responded with their usual froideur. The CAC 40 fell by roughly 2%, led down by the banks, while yields on ten-year French bonds climbed to 3.56%. The spread over German Bunds has widened to 0.88 percentage points, brushing levels last seen during the eurozone debt crisis. The euro itself slipped 0.6% against the dollar, as investors quietly asked whether the bloc’s second-largest economy has become uninvestable.
France, once the continent’s anchor, is now the source of its unease. Lecornu’s exit, the third prime ministerial resignation since Macron’s disastrous snap elections in 2024, has deepened the impression that the Élysée is presiding over a constitutional deadlock. The National Assembly remains divided, policymaking paralysed, and the President increasingly resembles a man shouting orders from the quarterdeck of a ship without a rudder.
For markets, this is more than political gossip. France’s role at the centre of the eurozone’s fiscal and banking architecture means its instability quickly becomes everyone’s problem. The widening yield spread with Germany isn’t merely technical noise; it’s a signal that investors are beginning to question the credibility of the entire project. When the French treasury must pay nearly a full percentage point more than Berlin to borrow, the old assumptions of euro unity start to fray.
This is an awkward moment for Europe
Macron’s options are unenviable. He can appoint yet another interim premier, destined to fail in the same legislative stalemate, or gamble on fresh elections that could hand even greater power to the far right. Neither route restores confidence. Meanwhile, France’s bureaucracy hums along, but without political direction the country risks sliding into permanent managerial government, a condition in which nothing collapses, but nothing gets fixed either.
All this comes at an exquisitely awkward moment for Europe. Germany is flirting with recession; Italy’s fiscal position is again under scrutiny; industrial output across the bloc is sagging. Investors, already anxious about growth, are now forced to price in political risk. Capital prefers stability, and right now Europe offers precious little of it.
Bond market is flashing a warning
The bond market, that old seismograph of fear, is flashing a warning. The last time France-Germany spreads looked like this, the eurozone was wrestling with Greece and Portugal over their debts. Today, the issue is not fiscal irresponsibility but paralysis, namely the creeping suspicion that Europe’s great powers have lost the will, and perhaps the ability, to govern decisively.
Bank shares have been the first casualties. Société Générale, BNP Paribas and Crédit Agricole all fell sharply, hit by concerns about their sovereign exposure. The pan-European STOXX 600 also dipped, reflecting the ripple effect of Parisian instability on a continent already short of optimism.
The euro’s decline is more than a currency move – it’s now looking more like a verdict. A bloc that cannot project political coherence will not command financial confidence. Investors have retreated to the dollar and other safe havens (gold), preferring the dull predictability of Washington gridlock to the operatic uncertainty of French politics.
Macron once promised to rejuvenate the European project. Instead, he finds himself presiding over its most theatrical symptom: a France that cannot decide what it wants to be. Until that changes, the markets will keep voting with their feet—and the euro, like its politics, will remain a currency in search of conviction.
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