Investors rattled by resignation of French PM but country is not alone in trying to grapple with political maths
Investors rattled by resignation of French PM but country is not alone in trying to grapple with political maths
Sébastien Lecornu’s abrupt resignation as the French prime minister on Monday after less than a month in the role marked the latest clash between France’s stretched public finances and its polarised politics.
Lecornu was the latest prime minister to try and fail to cobble together a package of spending cuts and tax rises that would pass muster in a parliament without a clear majority, and contain mounting bond market pressures.
Emmanuel Macron is left with the choice of appointing yet another premier to try their luck with the political maths – or resigning himself. Not surprisingly, markets were rattled by the news on Monday.
France’s travails are particularly acute, but the president is far from alone in 2025 in trying to grapple with a mismatch between overstretched public finances and a weary electorate with little appetite for budget cuts.
Government bond yields, essentially the interest rate on a country’s debt, have been creeping up in many major economies in recent weeks and months, amid concerns about tax and spending pressures.
Yields on longer-term Japanese debt jumped on Monday, with the likely new prime minister, Sanae Takaichi, expected to ramp up spending – despite Tokyo’s 250% of gross domestic product (GDP) debt pile – amid consumer frustration over rising prices.
In the UK the putative Labour leadership contender Andy Burnham was ridiculed by colleagues last week for suggesting the government should be less “in hock” to the bond markets, when the Treasury is paying £110bn a year in interest to investors, and yields have repeatedly shifted in response to policy moves – as well as global pressures.
