Sébastien Lecornu's Resignation Sparks Turmoil in French Financial Markets

The resignation of French Prime Minister Sébastien Lecornu on October 6, 2025, has triggered significant instability in French financial markets. Major French bank stocks plunged sharply, with BNP Paribas falling 4.45%, Société Générale dropping 5.85%, and Crédit Agricole declining 4.25% shortly after the market opened, according to Le Figaro. The CAC 40 index also saw a steep decline, falling 1.49% initially and nearing 2% at one point.

This political upheaval has profoundly unsettled the French public debt market. French 10-year government bond yields briefly surged to 3.61% before easing to 3.57%, an increase that signals shaken investor confidence. Notably, the spread between French and German borrowing rates widened to 89 basis points, the highest since January 2025, reflecting heightened anxiety over France's economic outlook.

Market analysts link these developments to the sensitivity of French banks to national debt risks. Alexandre Baradez, head of market analysis at IG France, highlighted that the bank stock fall was a direct response to Lecornu’s resignation, as European banks reassess exposure to French debt. Antoine Andreani from XTB France warned that surpassing a 3.60% yield threshold on the 10-year bonds could provoke aggressive investor sell-offs and threaten the country's fiscal stability.

Overall, the immediate aftermath of Lecornu’s political departure underscores heightened investor nervousness and challenges in managing France's economic landscape amid growing uncertainty.