France’s Political Crisis Deepens as Lecornu’s Resignation Rattles the Euro

France’s political turmoil intensified after Prime Minister Sébastien Lecornu resigned on October 6, 2025, only hours after revealing his cabinet lineup. The resignation, swiftly accepted by President Emmanuel Macron, signaled deep fractures inside the ruling coalition and immediately hit European markets. The euro slipped in early trading, with the single currency weakening against the dollar (Zorrox: EURUSD) as traders priced in heightened uncertainty around France’s fiscal outlook and policy direction.

A Government Without a Grip

Lecornu’s abrupt exit marks the fifth government collapse in under two years — a sign of France’s deep political fatigue. Since the 2024 snap election delivered a hung parliament, Macron’s centrist Renaissance bloc has survived on fragile alliances and procedural workarounds. Lecornu had pledged not to use Article 49.3, the controversial measure that allows legislation to pass without a vote. It was meant to restore legitimacy but left his administration unable to act.

The cabinet he presented the night before his resignation was widely viewed as technocratic continuity, not renewal. Both left-wing and conservative lawmakers dismissed it as tone-deaf to voter frustration. Facing immediate no-confidence threats, Lecornu concluded by Monday morning that his government had no viable path forward.

Macron’s Shrinking Room for Maneuver

President Macron now faces a narrowing set of choices, none appealing. He could name another moderate in hopes of calming markets, but previous reshuffles have failed to build parliamentary stability. Dissolving the National Assembly remains an option, yet it risks boosting the far-right Rassemblement National, whose leader Jordan Bardella has already called for snap elections.

A unity cabinet could steady the ship temporarily, but cross-party cooperation looks improbable. Macron’s approval ratings are eroding, and his political authority is visibly weakening. For investors, the question is no longer whether France can pass a budget — it’s whether Macron can govern at all.

Fiscal Strains Fuel Market Anxiety

France’s fiscal position adds to the pressure. The deficit is projected near 5.3% of GDP for 2025, well above the EU’s 3% ceiling, and debt is nearing 114% of output. Ratings agencies have warned that continued political paralysis could undermine fiscal reforms.

French bond yields rose toward 3.4% on Monday, widening the gap with German Bunds. Traders are watching closely for signs of contagion across southern Europe, where risk premiums often magnify regional tensions. The euro’s softness underscores investor unease about policy continuity in the Eurozone’s second-largest economy.

European Reverberations

France’s crisis has implications far beyond Paris. As one of the Eurozone’s anchors, its instability complicates EU efforts to enforce fiscal discipline and coordinate on defense and energy policy. Prolonged gridlock could slow initiatives critical to European competitiveness and cohesion.

For Brussels and Berlin, the priority is stability. Yet each new crisis in Paris chips away at investor confidence and raises doubts about the bloc’s ability to function under pressure. The French government’s paralysis is fast becoming Europe’s problem.

Tips for Traders

• Watch the euro (Zorrox: EURUSD) for short-term swings tied to French political headlines.

• Track French–German bond spreads as an indicator of growing fiscal risk.

• Monitor credit rating agency updates for any hint of sovereign reassessment.

• Stay cautious with exposure to French financials until a stable government is in place.

• Use EuroStoxx futures to hedge volatility linked to renewed political tension.

• Keep an eye on ECB communications, as France’s instability may influence tone and forward guidance.