Core Viewpoint - France is facing a significant political and financial crisis due to Prime Minister François Bérou's proposed €44 billion austerity plan, which aims to reduce the budget deficit but has met with widespread opposition and market panic [1][2][3]. Financial Situation - The French government plans to reduce the budget deficit from approximately 5.8% in 2024 to 4.6% by 2026, with measures including the cancellation of two national holidays, which has sparked public outrage [2][4]. - France's public debt has exceeded €3.34 trillion, representing 113.9% of GDP, and the country has the third-highest debt level globally, trailing only the US and Japan [4][5]. Market Reactions - Following the announcement of the austerity plan, the Paris CAC 40 index fell by about 1.7%, and the yield on 10-year French government bonds surged above 3.5%, nearing Italian levels [2][3]. - Concerns about the potential collapse of the government have led to fears of increased financing costs, with warnings that France could soon have higher costs than Italy if the situation deteriorates [3][4]. Economic Challenges - The French economy is projected to grow at around 1% this year, significantly below pre-pandemic levels, with consumer spending and investment hampered by limited purchasing power and uncertainty [5][6]. - The International Monetary Fund (IMF) has indicated that France needs "additional significant budget efforts" to avoid losing control over its debt trajectory [5]. Broader Implications - The rising yields on French debt could have repercussions for the global bond market, as France is a key player in the Eurozone, and any instability could affect investor confidence in the euro [6][7]. - The situation raises questions about whether Paris could become the center of the next European financial crisis, especially given the lack of consensus in the political arena [6][7].