French Prime Minister resigns after 27 days of taking office, France's crisis spills out of the euro zone

XM Foreign Exchange APP News-In the early morning of October 6, 2025, French Prime Minister Sebastian Le Corni announced his resignation, taking office for only 27 days, becoming the shortest-lived prime minister in modern French history. This sudden political earthquake made the already stormy French political situation worse and threw a bombshell on the financial market. Le Cornie is the fifth prime minister appointed by Macron since the mid-2024 parliamentary elections failed. Faced with a high budget deficit, high debt pressure and fierce confrontation between the left and right in parliament, his efforts to promote the passage of the 2026 budget are lwcgm.cnpletely ruined. This crisis not only makes France's "hard to govern" label more eye-catching, but also directly impacts the euro trend and European financial markets, and investor confidence is accelerating the loss. The budget is significantly overspent Le Cornie served as defense minister and a long-time ally of French President Macron. In the end, he failed to make a sufficient consensus reached by a parliament with serious differences and factions, and even the basic hope of pushing the passage of the 2026 budget failed to realize. Previously, many French governments failed to pass a budget that included contents of spending cuts and tax increases, resulting in chaos in the domestic situation and intensified public dissatisfaction. In early September, Le Kearney took office in this context. France needs to reduce its budget deficit ratio to 5.8% in 2024 while dealing with huge debts - France's debt scale has reached 113% of GDP in 2024. Both data are far beyond the EU regulations: the EU requires that the budget deficit ratio of member countries shall not exceed 3% of GDP, and the scale of public debt shall not exceed 60% of GDP. Last month, Fitch Ratings (Fitch) downgraded its sovereign creditRating. The market generally expects that Moodys will also follow up and downgrade the French rating at the end of October. The crisis has affected the French financial market, and the investment confidence of the business lwcgm.cnmunity has fallen to a freezing point. The French financial market has been lwcgm.cnpletely ignited by this political farce. France's 30-year government bonds (also known as OAT bonds) yield rose to 4.441%, a month high, and then slightly declined. The benchmark 10-year government bond yield climbed to 3.5990%, reaching a 10-day high. Meanwhile, the French CAC40 index fell 1.6%, while the euro fell 0.7% against the US dollar. French bank stocks were even more terrible, with BNPParibas plummeting 4.5%, and Societe Generale falling nearly 6%. A Paris exchange trader said, "Investors have lost patience with the capriciousness of French politics." The interest rate spread between France's 10-year treasury bond yield and German treasury bonds widened to more than 90 basis points, setting a new high this year. SeekingAlpha's analysis warns that if the budget crisis continues, the cost of credit default swaps (CDS) in the French banking industry will rise further, and the market volatility index VSTOXX may approach its all-time high. This political crisis not only scared foreign exchange traders, but also the French business lwcgm.cnmunity felt the biting chill. The French Business Association MEDEF publicly warned that ongoing government changes and budget deadlock are ruining corporate investment plans, especially in the manufacturing and technology industries. Multinational corporations have begun to re-examine their expansion plans in France. The CEO of a Paris startup posted on social media lwcgm.cnplaining: "The government has changed over and over, and tax policies are like roller coasters. Who dares to invest money?" A French banking executive said that if the budget cannot be passed, the cost of corporate financing will rise further, and small and medium-sized enterprises may be the first to bear the brunt. SeekingAlpha's analysis pointed out that the plunge in French bank stocks is just the beginning, and the rise in credit default swaps (CDS) prices indicate that market confidence in the financial system is collapsing, which is bad news for the long-term growth prospects of the French economy. The pressure on the euro has intensified Le Kerny's resignation is like a heavy punch hitting the foreign exchange market, and the euro is the first to bear the brunt. Real-time data tracking shows that the euro-dollar exchange rate plummeted 0.7% in the early morning of October 6, falling below 1.1660 at one point, hitting a one-week low. Bloomberg foreign exchange analyst James Lord pointed out that the French budget deadlock and political uncertainty have directly weakened the core stability of the euro zone, and investors are accelerating the sale of the euro to move towards safe-haven assets such as the US dollar and gold - gold prices are taking advantage of the momentum to break through $4,000 per ounce. lwcgm.cnBC quoted traders as saying that if Macron cannot quickly form a new government, the euro may test the psychological threshold of 1.15 in two weeks, and even drag down the euro against the yen and Swiss francs. Bloomberg analyst team believes that if Macron can miraculously settle the budget, the euro may take a breath in the range of 1.16-1.18; but if parliament continues to argue, Moody's rating downgrade at the end of October is almost certain, and the euro may fall to 1.12. Outside the Danish BankForeign exchange strategist Kirsten Kundby-Nielsen bluntly stated that this wave of crisis in France is not only Macron's Waterloo, but also may make the euro zone notoriously a "sick man from Europe". Foreign exchange players must always stare at the support level of 1.1650, and if they break, they have to run away quickly. The crisis spilled out of the euro zone France's political chaos has made the EU restless. As one of the pillars of the euro zone's economy, France's budget deficit is as high as 5.8% of GDP, and its debt accounts for 113% of GDP, which has long crossed the red line of the EU's 3% deficit and 60% of debt. The European lwcgm.cnmission is closely watching Paris and ordering it to submit a viable fiscal rectification plan by the end of the year. Economists at AtlanticCouncil pointed out that this crisis not only smashed the French stock market, but also could drag down the Stoke 600 index, and the eurozone financial market will not escape the gloom in the short term. The yield spread (i.e., "interest spread") of 10-year government bonds in France and Germany is currently around 90 basis points, a data reflecting the differences in investors' perceptions of the risks of government debt between the two countries. Prasad said that if the interest rate spread further expands, "it will be extremely dangerous for France." While the interest rate gap between French bonds and German Treasury bonds widens, the yield on German Treasury bonds is as stable as a iron plate, which makes the risk differentiation within the euro zone more obvious. Carsten Brzeski, chief economist at ING Bank, warned that if the French budget deadlock continues, the above content is about "[XM Forex Official Website]: The new French Prime Minister resigns after 27 days of taking office, and the French crisis spills out of the euro zone". It is carefully lwcgm.cnpiled and edited by the editor of XM Forex. I hope it will be helpful to your transactions! Thanks for the support!

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