French markets fell sharply for a second day as political turmoil deepened, with Prime Minister François Bayrou’s government on the brink of collapse over his proposed austerity measures. The CAC 40 dropped 2% in early trading, following Monday’s 1.6% fall, while French banking giants BNP Paribas and Société Générale lost 6% of their market value as billions of euros evaporated.
Bayrou has called a confidence vote for September 8 to secure approval for €43.8 billion in budget cuts aimed at reducing France’s deficit from 5.8% of GDP to EU limits. However, three major opposition parties — the far-right National Rally, the Greens, and the Socialist Party — have already declared they will vote against him, leaving his centrist party with just 210 seats compared to 330 opposition votes.
French government bonds came under pressure, with 10-year yields rising to 3.508%, the highest since March. The spread between French and German 10-year bonds widened to 78 basis points, nearing levels that historically signal systemic risk. Analysts warn that a further rise above Italian yields could mark a critical milestone for the markets.
Bayrou’s austerity plan includes cutting two public holidays, freezing welfare expenditures, and imposing a “solidarity contribution” on the wealthiest. With 84% of citizens opposing the budget, political resistance is high. The crisis is affecting broader Europe too: the STOXX 600 fell 1%, Germany’s DAX dropped 0.5%, and Britain’s FTSE 100 lost 0.6%. Finance Minister Eric Lombard warned that IMF intervention could become a risk if the government collapses.
#France #Markets #Finance #Bayrou #Austerity #CAC40 #Europe