Paris’s stock market opened lower amid growing concerns over a potential government collapse due to a budget standoff.
The Cac 40 index fell by as much as 1.2% to 7,146.02 points, while the euro lingered near 14-month lows.
French Prime Minister Michel Barnier, appointed by President Emmanuel Macron in September, is set to present a contentious social security financing plan today, which has faced opposition across the political spectrum.
Marine Le Pen, leader of the far-right National Rally (RN) in parliament, opposes several measures in the government’s 2025 budget proposal, including cuts to employer social contributions, partial inflation de-indexing of pensions, and reduced reimbursement for prescription drugs.
With no parliamentary majority, Mr. Barnier may invoke executive powers to pass the legislation without a vote. However, such a move risks triggering a no-confidence vote, with both the left-wing parties and Le Pen’s RN indicating they would support bringing down the government.
The Cac 40 was further weighed down by a 7% drop in Stellantis shares following the abrupt resignation of CEO Carlos Tavares.
Analysts predict the collapse of the French government.
Experts believe Michel Barnier’s administration is on the brink of failure, with Marine Le Pen’s far-right opposition warning that avoiding a no-confidence vote would require a “last-minute miracle.”
Markets are bracing for increased political instability in France as Barnier attempts to push through a budget aimed at reducing spending and raising taxes to lower the deficit to 5% of GDP next year.
Benoit Gerard, a rates strategist at Natixis, stated, “The base case now is for Barnier’s government to fall.”
