<p>Paris: France lurched into a political crisis after Prime Minister Francois Bayrou gambled on a confidence vote, with little hope of any quick solution to fix its ailing public finances, whether a new government or a snap parliamentary election comes next.</p>.<p>French markets tumbled after Bayrou jolted the political establishment out of its summer slumber on Monday with his unexpected move to seek a September 8 confidence vote on his debt-cutting plan.</p>.<p>The main opposition parties were quick to make it clear that they would be voting against him and his minority government, meaning it is all but certain to fall, barring a deal the opposition said was not going to happen.</p>.<p>Interior Minister Bruno Retailleau, who leads the conservative Republicans, said it would be "irresponsible" and "against France's interests" to vote for the government to fall. Others disagreed.</p>.<p>The far-right National Rally said Bayrou had de facto announced the end of his government. Marine Le Pen's party now wants President Emmanuel Macron to call a snap parliamentary election.</p>.<p>"I don't see what new prime minister wouldn't be immediately censured," a source close to Le Pen told Reuters.</p>.<p>The Socialists, whose vote will be crucial, also said they would vote against Bayrou.</p>.<p>"We need a different prime minister and, above all, a different policy," lead Socialist lawmaker Boris Vallaud wrote on X.</p>.<p>The confidence vote will be held two days before protests called by various groups on social media and backed by leftist parties and some unions, recalling the Yellow Vest unrest that erupted in 2018 over fuel price hikes and the cost of living.</p>.<p>Those "gilets jaunes" protests spiralled into a broader movement against Macron and his efforts at economic reform.</p>.<p>"Unless Francois Bayrou is confirmed in office - which is a hypothesis today that appears unlikely - we will enter a new phase which will be a phase of destabilisation," said pollster Jean-Daniel Levy, predicting negative consequences for the economy and France's image abroad.</p>.<p><strong>What next?</strong></p>.<p>A source close to Bayrou said his government was open to negotiation on the details of his budget proposals, though they were adamant that a budget squeeze is necessary.</p>.<p>Bayrou knew a no-confidence vote would eventually be tabled over the budget and decided to get ahead of the opposition, the source said.</p>.<p>If the government does indeed fall, Macron could name a new prime minister immediately or ask Bayrou to stay on as head of a caretaker government, or he could call another snap election.</p>.<p>A source in a key ministry said they expected Macron to opt for a new prime minister.</p>.<p>Justice Minister Gerald Darmanin told France 2 TV that while the government was still working on trying to find a compromise agreement, he "could not rule out" the scenario of another costly dissolution of parliament.</p>.<p>Macron, the only person who can dissolve parliament and launch fresh legislative elections, has yet to comment. But he has recently said he did not favour new snap elections.</p>.<p>He lost his last prime minister, Michel Barnier, to a no-confidence vote over the budget in late 2024, after just three months in office following a snap election in July that year.</p>.<p>When he called a snap election in June last year, Macron said it would bring "clarity" - the very same words used by Bayrou on Monday to explain why he was holding a confidence vote. But the 2024 snap election only resulted in a more fragmented parliament, bringing no clarity at all.</p>.<p><strong>Disruptions ahead?</strong></p>.<p>In case of a snap election, opinion polls show the new parliament would probably remain divided without an outright majority for any political camp.</p>.<p>"The French prime minister’s decision to call an early vote of confidence is most likely to trigger his replacement with yet another prime minister or (less likely) fresh legislative elections," Capital Economics analysts wrote in a note. "Either way, France's budget deficit will remain well above the level needed to stabilise the debt ratio."</p>.<p>France's blue chip CAC40 index was down nearly 2% in early trade on Tuesday, having fallen 1.6% late on Monday. Banking giants BNP Paribas and Societe Generale slid more than 6% each.</p>.<p>Meanwhile, 10-year French government bond yields briefly rose to 3.53%, the highest since March, before steadying at 3.50%. When a bond's yield rises, its price falls. </p>
<p>Paris: France lurched into a political crisis after Prime Minister Francois Bayrou gambled on a confidence vote, with little hope of any quick solution to fix its ailing public finances, whether a new government or a snap parliamentary election comes next.</p>.<p>French markets tumbled after Bayrou jolted the political establishment out of its summer slumber on Monday with his unexpected move to seek a September 8 confidence vote on his debt-cutting plan.</p>.<p>The main opposition parties were quick to make it clear that they would be voting against him and his minority government, meaning it is all but certain to fall, barring a deal the opposition said was not going to happen.</p>.<p>Interior Minister Bruno Retailleau, who leads the conservative Republicans, said it would be "irresponsible" and "against France's interests" to vote for the government to fall. Others disagreed.</p>.<p>The far-right National Rally said Bayrou had de facto announced the end of his government. Marine Le Pen's party now wants President Emmanuel Macron to call a snap parliamentary election.</p>.<p>"I don't see what new prime minister wouldn't be immediately censured," a source close to Le Pen told Reuters.</p>.<p>The Socialists, whose vote will be crucial, also said they would vote against Bayrou.</p>.<p>"We need a different prime minister and, above all, a different policy," lead Socialist lawmaker Boris Vallaud wrote on X.</p>.<p>The confidence vote will be held two days before protests called by various groups on social media and backed by leftist parties and some unions, recalling the Yellow Vest unrest that erupted in 2018 over fuel price hikes and the cost of living.</p>.<p>Those "gilets jaunes" protests spiralled into a broader movement against Macron and his efforts at economic reform.</p>.<p>"Unless Francois Bayrou is confirmed in office - which is a hypothesis today that appears unlikely - we will enter a new phase which will be a phase of destabilisation," said pollster Jean-Daniel Levy, predicting negative consequences for the economy and France's image abroad.</p>.<p><strong>What next?</strong></p>.<p>A source close to Bayrou said his government was open to negotiation on the details of his budget proposals, though they were adamant that a budget squeeze is necessary.</p>.<p>Bayrou knew a no-confidence vote would eventually be tabled over the budget and decided to get ahead of the opposition, the source said.</p>.<p>If the government does indeed fall, Macron could name a new prime minister immediately or ask Bayrou to stay on as head of a caretaker government, or he could call another snap election.</p>.<p>A source in a key ministry said they expected Macron to opt for a new prime minister.</p>.<p>Justice Minister Gerald Darmanin told France 2 TV that while the government was still working on trying to find a compromise agreement, he "could not rule out" the scenario of another costly dissolution of parliament.</p>.<p>Macron, the only person who can dissolve parliament and launch fresh legislative elections, has yet to comment. But he has recently said he did not favour new snap elections.</p>.<p>He lost his last prime minister, Michel Barnier, to a no-confidence vote over the budget in late 2024, after just three months in office following a snap election in July that year.</p>.<p>When he called a snap election in June last year, Macron said it would bring "clarity" - the very same words used by Bayrou on Monday to explain why he was holding a confidence vote. But the 2024 snap election only resulted in a more fragmented parliament, bringing no clarity at all.</p>.<p><strong>Disruptions ahead?</strong></p>.<p>In case of a snap election, opinion polls show the new parliament would probably remain divided without an outright majority for any political camp.</p>.<p>"The French prime minister’s decision to call an early vote of confidence is most likely to trigger his replacement with yet another prime minister or (less likely) fresh legislative elections," Capital Economics analysts wrote in a note. "Either way, France's budget deficit will remain well above the level needed to stabilise the debt ratio."</p>.<p>France's blue chip CAC40 index was down nearly 2% in early trade on Tuesday, having fallen 1.6% late on Monday. Banking giants BNP Paribas and Societe Generale slid more than 6% each.</p>.<p>Meanwhile, 10-year French government bond yields briefly rose to 3.53%, the highest since March, before steadying at 3.50%. When a bond's yield rises, its price falls. </p>