Euro Slides as Markets React to France Political Deadlock
The euro fell more than 0.5% on Monday, slipping below $1.167, its weakest level since September as market reacted to France’s newly appointed Prime Minister, Sébastien Lecornu, resignation
The ex-PM tender resignation following President Emmanuel Macron’s decision to retain a largely unchanged cabinet, which drew swift criticism from opposition parties.
Lecornu, who took office less than a month ago, faced the daunting challenge of steering a budget through a deeply divided parliament.
The upcoming fiscal plan is expected to include unpopular spending cuts and tax hikes aimed at curbing France’s deficit — the largest in the euro area — further fueling political tension and investor concern.
Macron accepted Prime Lecornu’s resignation just hours after unveiling his cabinet, the presidency said, plunging the European nation further into political deadlock.
Macron named Lecornu, a former defence minister, to the post last month. But the largely unchanged cabinet he unveiled late on Sunday to work with Lecornu sparked fierce criticism across the political spectrum.
Lecornu had faced the daunting task of finding approval in a deeply divided parliament for an austerity budget for next year. Lecornu’s two immediate predecessors, Francois Bayrou and Michel Barnier, were ousted by the legislative chamber in a standoff over the spending plan.
France’s public debt has reached a record high, official data showed last week
France’s debt-to-GDP ratio is now the European Union’s third-highest after Greece and Italy, and is close to twice the 60 percent permitted under EU rules.
Previous governments had rammed the last three annual budgets through parliament without a vote, a method allowed by the constitution but deeply criticised by the opposition.
But Lecornu promised last week to ensure lawmakers were able to vote on the bill.
France has been mired in deadlock since Macron gambled on snap parliamentary elections in the middle of last year in the hopes of bolstering his authority. The move backfired, leaving the Macron-friendly bloc in the assembly in a minority. First Holdco YTD Return Tightens as Share Price Slips
