00:00Caroline, Macron has bought himself a bit of thinking time here. What's the latest?
00:07Just like a good series on TV, Monday brought many unexpected twists in French politics.
00:15First, we had the Republicans being angry at the nomination of Bruno Le Maire as Defence Minister.
00:22During the afternoon, Bruno Le Maire actually came out with a tweet saying he was giving up this job as Defence Minister.
00:30But the problem is that Prime Minister Le Cornu had already resigned because he said that the Republicans were not really team players willing to compromise.
00:41So the government only lasted 14 hours, the shortest-lived French government in one century.
00:57Then Macron came out with this statement saying I'm giving him 48 hours, another chance to try and find some kind of stability,
01:05to try and reach out again to opposition parties, perhaps find some kind of coalition.
01:11Le Cornu accepted the mission even though he also is not willing to remain Prime Minister even if he succeeds.
01:21And if he doesn't, of course, you have the grand finale on Wednesday night with Macron saying that he will take his responsibility.
01:29At the moment, President Macron is still ruling out a resignation, which is something that the extremes have been calling for.
01:39At the moment, he's threatening to dissolve Parliament again so we could see another snap elections in France in just over a year.
01:50So, Caroline, that's the political drama. Just walk us through the reaction on the markets and what we can expect next.
01:55Next, you've been mentioning the CAC 40 down 1.36% yesterday, especially an impact on banks, in fact, dragging the entire European banking sectors
02:09because, you know, European banks, they have exposure of about 500 billion euros of French sovereign bonds.
02:17So, we could see this weighing on the markets again. We saw the spread between the French and the German 10-year reaching out as much as 86 basis points.
02:27And we had analysts saying this could go up to 100 basis points easily if we have snap elections.
02:34A socialist prime minister, of course, is one last option for President Macron.
02:40But that would also mean a budget that is watered down because we should also bear in mind that with this whole political crisis,
02:48France is going to miss its deadline on the budget.
02:51The budget was supposed to be presented at some point next week in order to be debated for 70 days in Parliament.
02:58This deadline is likely to be missed.
03:01There is no shutdown like in the US, in France, meaning we'll probably have, like last year, some special laws in order to roll over the 2025 budget into 2026.
03:12In the short term, it's actually good news for public finances because that means all the pensions,
03:18all the wealth system is not going to be indexed on inflation.
03:23But of course, in the long term, that means no structural reform and Le Cornu warning that the deficit could actually reach 6% next year if no budget compromise is in sight.
Be the first to comment