Bayrou's vote of confidence: the CAC 40 plummets after the Prime Minister's announcement

His speech wasn't even fully finished when the figures were already turning red. The Paris Stock Exchange fell sharply late Monday afternoon, August 25, losing more than 1.50%, following François Bayrou's press address on the budget . The reason: during this speech, the Prime Minister announced that he intended to seek a vote of confidence from the National Assembly on September 8.

La France Insoumise (LFI) and the French Communist Party (PCF) have already announced that they will vote against it in order to "bring down the government." The National Rally (RN) has responded in the same way. This seriously jeopardizes the future of the Prime Minister, and thus raises the spectre of significant political instability.

Thus, at around 5:30 p.m. (Paris time), in the final trading, and while François Bayrou was still answering journalists' final questions, the CAC 40 lost 130.67 points, or 1.64%, to 7,839.02 points, compared to the previous day. At the close, the leading Parisian index fell by 1.59%. Shortly before the Prime Minister's intervention, it was only slightly down.

"The markets are seeing that François Bayrou's survival as Prime Minister is less and less assured" and that "his government is hanging by a thread," said Vincent Juvyns, strategist at ING.

Among the biggest decliners were Vinci (-5.81%), Veolia (-4.08%), Bouygues (-4.16%) and Engie (-2.90%). Bank stocks were also down: BNP Paribas (-3.87%), Crédit Agricole (-3.37%) and Société Générale (-3.67%).

"If François Bayrou leaves his post, it could put French debt securities under significant pressure," predicted Pierre-Alexis Dumont, investment director at Sycomore. As a sign of concern, the interest rate on French debt climbed in the wake of François Bayrou's speech. At ten-year maturity, it rose to 3.50%, compared to 3.42% at the close on Friday.

This knee-jerk reaction from the markets is reminiscent of that which occurred after the dissolution of the National Assembly in June 2024, or after the censure of Michel Barnier's government in December 2024.

By seeking the confidence of the National Assembly on September 8, the Prime Minister is playing a new and perilous card to get his budget savings plan adopted, all against a backdrop of calls to block France on September 10.

François Bayrou praised a "clarification" in a "decisive moment" , explaining the principle of this vote: "if you have a majority, the government is confirmed. If you don't have a majority, the government falls." Risking to bring with it cascading consequences for the country's economic activity.