Core Points - French Prime Minister Sébastien Lecornu resigned after just 27 days in office, marking the shortest tenure in the history of the Fifth Republic and becoming the seventh prime minister to leave under President Macron's administration [1][4] - Lecornu's resignation was triggered by backlash against the newly announced government member list, which was criticized for lacking substantial change and retaining many officials from the previous government [4][5] - The political environment in France is currently unstable, with Macron's centrist coalition weakened in the National Assembly, leading to increased scrutiny and criticism from opposition parties [5][8] Political Context - Lecornu's resignation reflects deeper political issues rather than just personnel changes, as Macron aims to push reforms amidst a fragmented political landscape [5] - The political crisis has left Macron with limited options: appointing a new prime minister, dissolving the National Assembly for early elections, or potentially resigning himself [8][9] Market Reaction - The resignation led to immediate market reactions, with the CAC40 index dropping by 1.36% and the euro falling to 1.1675 against the dollar, down from nearly 1.20 [7] - The yield on French 10-year government bonds surged over 9 basis points, exceeding 3.6%, indicating rising concerns over France's debt risk [7] Economic Implications - The ongoing political turmoil has stalled the progress of the 2026 budget proposal, raising concerns about fiscal consolidation [10] - France's public debt reached €3.345 trillion, approximately 114% of GDP, with a projected budget deficit of 5.4% of GDP for the year [10][11] - Fitch Ratings downgraded France's sovereign credit rating from "AA-" to "A+" due to persistent political instability and unresolved budget issues, predicting that debt levels could rise to 121% of GDP by 2027 [10][11]

Political Situation - The appointment of new Prime Minister Lecornu follows the resignation of former Prime Minister Borne, who failed to secure a confidence vote in the National Assembly, highlighting the fragmentation of French politics [1][7] - Public sentiment is increasingly negative, with 74% of respondents viewing the government's collapse as a warning that France is "ungovernable" [7] - The political instability is exacerbated by the fragmented National Assembly, where left-wing, centrist, and far-right parties are in a state of deadlock, making it difficult for any government to maintain support [7][8] Economic Challenges - France's public debt has reached approximately €3.35 trillion, accounting for about 113% of its GDP, with projections indicating it could rise to 125% by 2030 [4] - The budget deficit for this year is estimated to be between 5.4% and 5.8% of GDP, significantly exceeding the EU's limit of 3% [4] - The government faces a dilemma of needing to cut public spending while also maintaining essential services, leading to widespread public discontent [4][5] Social Unrest - Recent protests, including the "Let’s Block Everything" movement, reflect widespread anger among the populace, with nearly 25% expressing frustration with the current state of the nation [3][5] - The ongoing economic challenges, including rising living costs due to the COVID-19 pandemic and the Ukraine conflict, have intensified social inequalities and dissatisfaction with government policies [3][4] Future Outlook - Analysts express skepticism about the ability of any political party to achieve consensus on debt reduction, given the rise of populist movements on both the left and right [6] - The frequent changes in government are likely to undermine policy continuity, further fueling public disillusionment and potentially empowering extreme political factions [11][12] - The political and economic crises in France could have broader implications for the EU, as France is a key player in the Eurozone and its instability may affect regional economic stability [12][13]