"In Reality, It's All Over": French Socialists Threaten To End PM Lecornu's Term (Again) Over Budget Showdown

The French CAC 40 index has fallen, and the yield spread between French and German 10-year bonds has widened, indicating ongoing political instability. France's Socialist Party has threatened to vote down Prime Minister Lecornu's minority government next week. This threat is contingent on the 2026 budget not including 15-20 billion euros in additional taxes. Without Socialist support, no-confidence motions are likely to pass, leading to the government's downfall. Socialist leader Olivier Faure stated that a lack of clear changes to the budget and social security bills by Monday would lead to their opposition. The Socialists are attempting to secure fiscal concessions without triggering potentially unfavorable snap elections. Analysts have expressed doubts about Prime Minister Lecornu's ability to remain in office until year-end, with some suggesting he might not last another week. A key challenge for Lecornu is passing a budget, a hurdle that has plagued his predecessors. The Socialists, while offering conditional support for confidence votes, do not endorse his budget proposals. Lecornu also faces the challenge of suspending pension reform, which is opposed by the Senate. Prediction markets show increasing odds of Lecornu's ouster by the end of next week and the year. The widening yield spread suggests markets are preparing for increased political uncertainty.