French PM Francois Bayrou To Resign After Losing Confidence Vote

French Prime Minister Francois Bayrou lost a confidence motion in parliament, forcing a third change in government in just over a year and reviving uncertainty over how the country can tackle its mounting debt burden. 

Parties across the political spectrum in France’s lower house joined forces Monday to overwhelmingly issue the rebuke to Bayrou, who called the motion in a failed attempt to rally support for his unpopular budget reforms. Just 194 lawmakers voted in support of the prime minister and 364 voted against.  

President Emmanuel Macron will accept Bayrou’s resignation on Tuesday and name a new premier in the coming days, according to a statement from the president’s office. The new government will still have to find a way to pass a budget, an exercise that has now toppled the last two prime ministers.

France is “drowning in a tide of debt,” Bayrou told lawmakers Monday ahead of the vote. “You have the power to bring down the government but you don’t have the power to erase reality.”

The current political crisis comes a year after Macron called an ill-fated snap election to consolidate centrist power in the face of a rising far right. Since then, France’s CAC 40 Index — home of bellwethers such as LVMH Moet Hennessy Louis Vuitton SE, Airbus SE and L’Oreal SA — has fallen 3.3%, compared with a 5.4% gain for the Stoxx Europe 600 Index and a 25% rise in Germany’s DAX Index, excluding dividends.

There was no reaction in financial markets after the vote. Futures contracts for the CAC 40 equity index were still up 0.6% on the day, while futures for French bonds as well as the euro were little changed. 

Bayrou said the confidence motion was needed to force a “clarification” on France’s dire fiscal situation. France’s deficit is the widest in the euro area with debt rising by €5,000 ($5,840) a second. The cost to service its obligations is set to hit €75 billion next year, according to the government.

Bayrou had proposed €44 billion of spending cuts and tax hikes that would narrow France’s 2026 deficit to 4.6% of economic output from an expected 5.4% this year. He also floated an unpopular proposal to cut two public holidays as a way to reduce costs in Europe’s second-largest economy.

Marine Le Pen’s far-right National Rally as well as the leftist France Unbowed have both called for new legislative elections. Some have also called for Macron’s resignation, but he has steadfastly said he will remain through the end of his term in 2027. 

“If there’s no dissolution, we will continue in a constructive but uncompromising spirit to promote the ideas that our voters have asked us to defend,” Le Pen said on Monday. “But I say this solemnly: do not expect the National Rally to follow you in your fiscal and migratory craziness, in your petty ideological biases that prevent you from seeing the reality of the country.”

Macron has so far refrained from publicly discussing his options. But people familiar with the president’s thinking say he would seek an accord among parties in the National Assembly to appoint a new prime minister rather than call a new election. 

“We are proposing another political path,” Boris Vallaud, the leader of the Socialist Party in the National Assembly, said after the vote. “Not Emmanuel Macron’s, which got us into this impasse.”

The decision would need to be made quickly so that there’s a government in place to face a union strike on Sept. 18 against the 2026 budget plan, the people said. A separate, less centralized, protest is planned on Sept. 10. 

The French president is solely responsible for picking a new premier, and there is no constitutional time limit for a decision. It took Macron two months to appoint the previous premier, Michel Barnier, who lasted only 90 days. Macron took more than a week to name Bayrou after Barnier was ousted. Once appointed, the premier must propose a cabinet to be signed off by Macron. 

Picking a new prime minister won’t be easy. Macron’s ideal candidate should be able to hold together the centrist bloc while forging ties with the Socialists to pass legislation, according to people familiar with the matter. 

“Whichever outcome of the current political crisis, the probability of a significant public finances reform will remain low,” Michael Nizard, head of multi-asset and overlay at Edmond de Rothschild Asset Management, wrote in emailed comments. “So much so that financial markets themselves seem resigned and might settle for a scenario where the budget deficit does not deteriorate further.”