Impact Analysis

The appointment of Sébastien Lecornu is set to maintain the current pro-business economic agenda, including existing tax cuts for corporations and the wealthy, and the recently raised retirement age. This approach, however, risks further alienating center-left parties and increasing reliance on the far-right National Rally (RN) for parliamentary support. For businesses, particularly those in the defense and aerospace sectors, continued investment is expected due to Lecornu's background. However, broader economic uncertainty and potential social unrest from planned protests could disrupt supply chains and impact domestic consumption. While large multinational CAC 40 companies might remain somewhat insulated due to their diversified revenues, businesses heavily reliant on public procurement or domestic spending could face adverse effects from austerity measures. The National Rally's influence is amplified, as their tacit support will be crucial for budget passage, giving them leverage in policy negotiations.

Timeline

What happened: The French government collapsed after a no-confidence vote, triggered by then-Prime Minister François Bayrou's inability to pass a crucial austerity budget.
What's happening now: President Macron swiftly appointed Sébastien Lecornu as the new Prime Minister. Lecornu has been mandated to consult with all political forces in parliament to find compromises on the 2026 budget and other policies before forming his cabinet. Street protests against austerity measures are anticipated on Wednesday.
What's next: Intensive negotiations for the 2026 budget are expected. Key parliamentary votes on budget proposals and other legislation will follow. Further public demonstrations and strikes are planned for September 10 and 18, which could escalate social unrest.

Different Perspectives

Presidential Strategy: Macron's choice of Lecornu, a deeply loyal ally, is seen as a move to ensure stability and continuity in policy, avoiding a power vacuum ahead of anticipated protests. However, it sidesteps calls for a broader consensus candidate.
Opposition Criticism: Opponents argue that by not appointing a prime minister outside his own political camp, Macron risks further alienating an electorate already disillusioned after eight years of his leadership, potentially exacerbating political divisions.
National Rally's Stance: The far-right National Rally (RN) has indicated it will judge Lecornu's government based on its actions and policies, emphasizing their 'red lines' against tax increases on working people and advocating for reduced immigration costs and EU contributions, positioning themselves as potential kingmakers.
Market Reaction: While French sovereign bond yields have seen some increase, indicating investor concerns over fiscal instability, the broader European markets have shown a relatively muted reaction thus far, though prolonged political uncertainty could erode confidence.