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Super-debt, France in crisis: Council of Ministers underway, possible successors to Bayrou

The country's main opposition parties have hastened to make it clear that they will vote against Bayrou and his minority government

26 August 2025Aggiornato il 27 agosto 2025 alle ore 7.45

Il primo ministro francese Francois Bayrou partecipa alle Conferenze estive del sindacato democratico francese (CFDT) "Universites d'ete" presso la tenuta di Bierville a Boissy-la-Riviere, a sud di Parigi, Francia, 26 agosto 2025. THIBAUD MORITZ/Pool via REUTERS

6' min read

Key points

Total uncertainty
Lombard: no threat of IMF or ECB intervention
On the brink
Scope Ratings, with political crisis debt/GDP rising to 122% by 2030
Bardella, Macron dissolve parliament or resign

6' min read

The Council of Ministers is underway at the Elysée Palace in the presence of French President Emmanuel Macron and Prime Minister Francois Bayrou, who has called for a vote of confidence for his government on 8 September. This was reported by the broadcaster Bfmtv, explaining that, while a no-confidence vote on Bayrou is becoming more and more likely, the first names of the Matignon tenant's successor are beginning to circulate. These include Armed Forces Minister Sebastien Lecornu, former Interior Minister Gerald Darmanin and Bruno Retailleau, the current Interior Minister.

France could therefore face another early vote, France's Justice Minister speculated on Tuesday, after opposition parties declared they would vote to oust Prime Minister François Bayrou and as French markets plummeted.

Justice Minister Gérald Darmanin told France 2 that although the government is still working to find a compromise agreement, it "cannot rule out" the scenario ofanother costly dissolution of parliament. Emmanuel Macron, the only person who can dissolve parliament and call new legislative elections, has not yet commented on Bayrou's move, although Bayrou's entourage said on Monday that Macron had approved the plan.

The country's main opposition parties were quick to clarify that they will vote against Bayrou and his minority government. "We need a different prime minister and, above all, a different policy," wrote leading Socialist MP Boris Vallaud on X. Finance Minister Eric Lombard said the government still hopes to reach a last-minute agreement with the opposition, but from the far right to the far left, party leaders made it clear that this is unlikely to happen. Jean-Luc Melenchon, of the far-left France Insoumise party, went even further, saying that President Emmanuel Macron himself should resign. "Emmanuel Macron must go. He is responsible for the crisis," Melenchon wrote on X.

Total uncertainty

Macron called early elections in June last year, claiming they would bring 'clarity' - the same words used by Bayrou on Monday to explain why he had called a vote of confidence. But early elections in 2024 have only led to a more fragmented parliament, without any clarity. France's CAC40 blue chip index fell almost 2% in early trading on Tuesday, after falling 1.6% late Monday evening. The yield on 10-year French government bonds rose about 3 basis points in early trading to around 3.52%, the highest level since March. When the yield on a bond rises, its price falls.

Asked about other politicians' comments that a collapse of the Bayrou government could lead to the intervention of the International Monetary Fund in French finances, Finance Minister Lombard replied: 'This is a risk we take.

"It is a risk we would like to avoid, and should avoid, but I cannot tell you that it does not exist," he added.

Lombard: no threat of IMF or ECB intervention

The IMF usually only offers financial support to countries that find themselves excluded from the financial markets due to serious budget crises, and even then only on condition that they adopt serious reforms. France is far from being in this situation.

In a post on X, Minister Lombard himself went on to clarify: 'Today we are not under threat of any intervention, neither by the IMF, nor by the ECB, nor by any international organisation. The situation of our public finances,' he stressed, 'requires calm and lucidity. Calm is the recognition of the solidity of the French economy, of France's reputation on the markets and of the fact that we are financing our debt without difficulty. Today we are not threatened by any intervention, neither by the IMF, nor by the ECB, nor by any international organisation. Lucidity now requires us to act to restore our public finances, the imbalance of which is permanently compromising our freedom as a nation. To think that France would, by its very nature, be exempt from controlling its debt and sheltered from any risk is a myth. It is this balance that guides my actions as Minister of Economy and Finance. Parliament will have to make a conscious choice. It will have to be guided neither by frivolity nor by fear, but by the interests of the country'.

On the brink of the precipice

But Le Figaro headlined 'On the brink of the precipice' for therisk of political instability and return to the polls. With a mobilisation of opponents - born on social media - who declared their intention to blockade the country on 10 September. Bayrou wanted to anticipate the growing shadows of a no-confidence in his government in September. He did so by 'betting on the French', as Le Figaro writes, to whom he pledged to make them understand the risks that the country runs if it does not adopt its plan of public spending cuts that should take it out of the doldrums of over-indebtedness in four years.

Bank of France Governor Francois Villeroy de Galhau also spoke out: France risks passing on an intolerable situation to future generations if it fails to solve the problem of public finances, the governor said. 'The problems of public debt and deficit absolutely have to be addressed,' Villeroy told the regional daily Sud Ouest. Otherwise, debt payments will weigh even heavier on France's spending capacity, he says. 'We will be bequeathing an unbearable burden to our children,' Villeroy says.

OaT under pressure, spread widens with Bund and approaches BTp

The Governor of the Bank of France called for "a real public debate" on debt and measures to overcome it, advocating a "fair and shared" effort. In an interview, Villeroy de Galhau also called on Europe to 'mobilise its resources' in the face of US protectionism. Asked about the possible fall of the Bayrou government, the governor stressed that "the Bank of France does not have to decide on a political vote, nor on a social movement. It can simply recall an economic reality: the solution to our various challenges starts with our work and its quality, our economic destiny is in our own hands,' he concluded.

OaT, the French government bond, continues to be under pressure after Prime Minister Bayrou raised the alarm about the transalpine super-debt by calling for a confidence vote on 8 September on the budget cut plan that could lead to a government crisis. The 10-year OaT-Bund yield differential reached 78 basis points today, after having widened by four points to 77 yesterday. The benchmark 10-year OaT yield rose further today to 3.50 per cent from 3.49 per cent at yesterday's close. Italy's and France's spread over the Bund on the 10-year maturity also narrowed further, reducing today to 9 basis points from 12 points at yesterday's close.

Scope Ratings, with political crisis debt/GDP rising to 122% by 2030

Scope Ratings predicts that France's debt-to-GDP ratio will continue to rise to around 122% by 2030, from 113% in 2024, exceeding the government's target of 117% in 2029. The new estimate comes in light of weaker fiscal projections by the rating agency due to the political stalemate. "As of today," reads a note from Scope Ratings, "the appointment of a new prime minister who will have to make concessions on the 2026 budget appears more likely than another dissolution, given the risk of gridlock stemming from another hung parliament dominated by far-left or far-right parties. Approval of next year's budget by the current parliament thus requires, according to the agency, a weakening of the Bayrou government's savings plan by EUR 44 billion, or about 1.5 per cent of GDP. The political impasse jeopardises the planned reduction of the budget deficit from 5.8% of GDP in 2024 to 5.4% in 2025 and 4.6% in 2026. In contrast, Scope's basic assumption is that France's budget deficit will only fall to 5.6 per cent of GDP in 2025 and 5.3 per cent in 2026. The agency is also 'more cautious than the government' about the long-term prospects for fiscal consolidation, in particular 'due to France's higher refinancing rates'.

According to the agency, net interest payments are set to increase to around 4% of government revenues in 2025 from 3.6% in 2024, in line with Belgium (AA-/Negative, 3.8%) but still lower than Spain (A/Stabile, 5.2%) and the UK (AA/Stabile, 6.6%). Similarly, French 10-year government bond yields rose moderately but steadily to 3.5%, converging with those of Spain and Italy (BBB+/Stabile). Today, France is rated AA- with a Stable outlook.

Bardella, Macron dissolve parliament or resign

The extreme right meanwhile attacks. The president of the Rassemblement National, Jordan Bardella, called on French President Emmanuel Macron to 'dissolve' the Assembly or 'resign' so as to 'break the political deadlock' in the transalpine country, which is awaiting an important vote of confidence in the Bayrou government on 8 September. Bardella, who reiterated his decision to deny confidence in the current executive, emphasised - interviewed on TF1's 8pm news programme - that 'the only possibility' is to 'return to the polls'.