French Political Instability Sways Investor Sentiments

Investor sentiment shifted as the collapse of the French government led to decreased risk premiums on French debt over German Bunds. This political uncertainty prompted analysts to forecast prolonged instability and limited policy space until the earliest potential legislative elections in September 2025.

The political landscape in France has catalyzed changes in investor sentiment, as the collapse of the French government led to a decrease in the risk premium for holding French debt over German Bunds.

This shift comes as far-right and left-wing lawmakers fueled no-confidence motions against Prime Minister Michel Barnier, sending ripples of uncertainty through the markets.

Analysts forecast prolonged instability until the earliest potential legislative elections in 2025, with limited policy space and persistent uncertainty in medium-term policy outlook under President Emmanuel Macron.

(With inputs from agencies.)