26.08.202507:44:23UTC+00French Stocks Plunge as Government Risks Collapse

The CAC 40 index experienced a sharp decline, falling by over 2% to below the 7,680-mark on Tuesday. This continued the downward trend from Monday's 1.6% drop, driven by market anxiety over a potential governmental collapse ahead of the confidence vote scheduled for September 8. Prime Minister François Bayrou has initiated a motion to garner support for his €44 billion austerity package. However, the three main opposition parties have pledged to oppose this motion, increasing the likelihood of his minority government’s collapse. Should the motion fail, President Macron may be compelled to either appoint a caretaker government or call for snap elections, a scenario reminiscent of the recent ousting of his previous prime minister due to a budgetary dispute. Bayrou justified this high-stakes move as essential for addressing France's mounting debt, yet market sentiment remains cautious, with concerns that the impasse could obscure the prospects for fiscal policy and reform. This tension has resulted in a widespread sell-off across French stocks, significantly affecting the banking and construction sectors. Major stocks under pressure include LVMH, which fell by 1.4%, BNP Paribas with a 3.5% decline, Axa down by 3.8%, and Vinci dropping by 5.8%.