The stock markets in France have gone into disarray as Prime Minister Sébastien Lecornu resigned less than a day after appointing his cabinet.
The unexpected news of resignation triggered chaos in markets as bond yields hit new highs and French stocks reached a new low.
Following the news, the CAC40 Index tumbled by 2 percent at 7,916.36. French bond yields rose to 3.58 percent on the 10-year note, showing an increase of 7 basis points.
Meanwhile, the euro depreciated against most major currencies, dropping 0.55 percent against the dollar, but it strengthened against the Japanese yen.
Shares in French lenders Société Générale, BNP Paribas, and Crédit Agricole dropped 6.21%, 5.28%, and 4.85% respectively.
Lecornu’s resignation further eclipses France’s economic condition as it is striving hard to tackle the budget crisis that led to collapse of successive governments.
In the backdrop of political and economic turmoil, the country has witnessed the fall of five PMs in less than 2 years.
The national debt now reaches more than €3 trillion, around 114% of Gross Domestic Product (GDP).
According to Leo Barincou, senior economist at Oxford Economics, “Lecornu's surprise resignation significantly increases the pressure on Emmanuel Macron to dissolve the National Assembly and call snap legislative elections. We believe this is now the most likely scenario.”
He added: “Bond spreads have ticked up, but the broader economic impact is likely to remain limited: political instability has become an entrenched feature of France's landscape… Fiscal consolidation will not occur, but it was never likely to in the first place.”
