French PM resigns after 27 days, causing fresh political turmoil

France’s new Prime Minister Sebastian Lecorne resigned a few weeks after his appointment, bringing the country into a new political crisis.

France’s fifth afternoon Recorne quit within two years, hours after naming a new cabinet on Sunday.

After his resignation, Recorne said “parties behave as if they had their own majority in Parliament,” and according to the commentary from the 24-year-old France, “the conditions were not met.”

“I was ready to compromise, but each party wanted other parties to adopt the entire program,” he said in a speech in the courtyard of the Palace of Matignon, the headquarters of the French Prime Ministers.

He now leaves the role only 27 days later, making him the shortest prime minister in the country, barely showing due to his tenure.

Former Defence Minister and longtime ally of French President Emmanuel Macron, Lecornes ultimately failed to consolidate the crack-divided parliament to the point they wanted to patrol the 2026 budget.

Now, the French market has responded strongly to the news as the state budget is likely to be questionable.

The yield on government bonds, or oats, for 30 years, reached a one-month high of 4.441% before retreating slightly. The benchmark 10-year bond yield rose to a 10-day high of 3.5990%. In France CAC40 The index fell 1.6%, while the euro fell 0.7% against the dollar.

The Lecorne was set up in early September against the backdrop of public unrest and dissatisfaction with the state of clutter as several consecutive governments failed to pass budgets detailing spending cuts and tax increases.

The country must close its fiscal deficit of 5.8% in 2024 and address a critical mountain of debt, which amounts to 113% of GDP in 2024. Both levels far outweigh EU regulations requiring that individual members’ deficits should not exceed 3% of GDP and public debt should not exceed 60% of economic output.

France suffered a downgrade from Fitch last month, with Moody’s expected to follow a widespread lawsuit at the end of October.

Lecorne’s departure is surprising as analysts say he and his minority governments are likely facing a no-confidence move brought about by political rivals who have sought concessions over budgets from past recent governments, following the financial positions of their respective (and other) ideologies.

Both the left and right parties on Monday were struggling with Lecornes, Macron and the ongoing political turmoil being overseen at the centre.

The right-wing national rally said that “macronism is dead at his feet” posted on social media platform X, and that the president must choose “Congress, resignation, and quickly.”

On the left, French Jean-Look Melancon called for the party without bows to go further and Macrons to be bounced each. “We are calling for immediate consideration of the motions brought by 104 lawmakers for Emmanuel Macron’s filings following Sebastian Recorne’s resignation,” Mellenchon wrote in X.

This new political crisis has undoubtedly put a lot of pressure on Macron, which has set up three failed minority governments since the mid-2024 parliamentary elections.

However, John Plassard, Cite-gestion’s partner and head of investment strategy, told CNBC on Monday that the worst-case scenario for French financial markets would be Macron’s resignation.

“I don’t think he wants to do that, but I think that’s the worst for the market because they don’t really want to govern this country, because they want to wait for the (new) election,” he told CNBC’s Squawk Box Europe.

Prasad said France has shown that it is “unruleable” with political parties on all sides that have made important decisions and show that they do not want to address the issue.

The gap, or “spreading” between French and German 10-year bonds — a reflection of investors’ perceptions of each government debt — is currently 87 basis points. If the gap becomes wider, it will be “very dangerous to France,” Prasad noted.