Political Crisis in France: Sharp Decline in Assets and Markets

Political Crisis in France and Its Impact on Markets

The sudden resignation of French Prime Minister Sebastien Lecornu has led to a deep political crisis across the country. With expectations of new elections, losses are widening in the French markets.

Following this development, the yield on French 10-year bonds rose by 11 basis points, reaching 3.61%. France's CAC 40 Index fell by 2%, shaking investor confidence. In particular, the banking sector saw losses of over 5% among major players like Societe Generale, Credit Agricole, and BNP Paribas. The common currency euro depreciated by 0.7% against the dollar.

Political Instability and Economic Consequences

Lecornu's resignation comes alongside unpopular spending cuts and tax increases in France, following a series of changes in prime minister positions. This situation complicates efforts to control the largest budget deficit in the Eurozone.

Luigi Buttiglione, founder of consultancy firm LB Macro, commented on the resignation, stating, "The drift of France into uncertainty could lead to further loss of confidence in the business world. This situation also negatively affects economic activities across the entire European Union."

International Credit Rating Agencies' Remarks

The challenges faced by France have resulted in the country's credit rating being downgraded by international credit rating agencies such as Moody's, S&P, and Fitch. Bloomberg strategists predict that French government bonds will experience further depreciation, noting an increased likelihood of new elections to overcome the political deadlock.

Decline in European Stock Markets

The political situation in France has also had a negative impact on European stock markets. The Stoxx Europe 600 index fell by 0.4%, Germany's DAX dropped by 0.3%, and UK's FTSE 100 decreased by 0.2%. Italy's FTSE MIB 30 index lost 0.6%, while Spain's IBEX 35 fell by 0.4%.