Euro tumbles amid France political crisis, investors lose faith in Europe’s stability
France’s latest government collapse has reignited turmoil across European markets, sending the euro lower and testing investor confidence in the bloc’s ability to maintain political and fiscal cohesion.
This is the warning from the CEO of one of the world’s largest independent financial advisory organisations following the resignation of prime minister Sébastien Lecornu — less than a month after his appointment.
It has jolted markets and intensified concerns that the eurozone’s second-largest economy is becoming ungovernable.
French stocks fell sharply, with the CAC 40 down around 2% as banking shares led losses. Yields on 10-year French bonds climbed to 3.56% while the spread over benchmark German Bunds widened to 0.88 percentage points, close to its highest level since the sovereign debt crisis.
Nigel Green, CEO of deVere Group, says: “The euro dropped 0.6% against the dollar, “reflecting a renewed sense of unease about Europe’s political and financial stability.”
This news has hit the euro and gives investors reasons to lose confidence in European markets.
“France is not a peripheral player — it’s the political and economic heart of the eurozone. When Paris falters, the entire structure shakes.”
Lecornu’s sudden exit, coming just hours after he unveiled his cabinet, has deepened the perception of chaos at the top of French politics.
He becomes the third prime minister to resign since president Emmanuel Macron called snap elections in 2024 — a contest that left the National Assembly divided and policymaking almost impossible.
Nigel Green continues: “This is no longer a routine political reshuffle — it’s a crisis of governance.
“Investors can cope with weak growth or high debt, but they can’t price paralysis. Europe’s second-largest economy is showing it can’t form a stable government, and that damages the credibility of the entire eurozone.”
The resignation leaves Macron with few good options. He can appoint another caretaker leader who may face the same gridlock, or call new elections that could strengthen far-right parties.
Either scenario risks prolonging instability at a time when Europe’s economic outlook is already fragile.
Nigel Green notes: “The timing couldn’t be worse. Germany’s slowdown, Italy’s fiscal pressures, and falling industrial output have already sapped investor confidence. France’s crisis adds political risk to an already difficult mix, and that combination rarely attracts capital.”
The widening yield spread between French and German bonds highlights how quickly investors are reassessing European risk. The last time the gap was this wide, Europe was battling to preserve its monetary union.
Nigel Green says: “The bond market is flashing a warning. When investors demand higher yields from France than from Germany, it shows they are questioning whether the eurozone can still move as one. That’s a dangerous perception to allow to take hold.”
Banking shares were hit hardest as concerns grew about exposure to sovereign debt. Société Générale, BNP Paribas and Crédit Agricole all fell sharply.
The pan-European STOXX 600 also dipped, reflecting the ripple effect of renewed political uncertainty in one of the bloc’s anchor economies.
The euro’s weakness underscores how tightly political credibility and currency strength are linked. Investors have turned back to the dollar and other perceived havens, wary of holding European assets until clarity returns.
Nigel Green explains: “Europe is being judged not on economic data, but on its ability to govern itself.
“Unless political leaders in Paris and Brussels can project stability and control, confidence will continue to erode. Markets are unforgiving when faith in leadership falters.”
Macron’s struggles to maintain a functioning majority have become a focal point for wider doubts about European governance.
With the EU already stretched by fiscal disagreements, migration pressures and defence commitments, France’s political paralysis adds another layer of risk to an already uncertain environment.
Nigel Green concludes: “The euro’s weakness is a symptom of a deeper issue — Europe’s inability to present a united, decisive front in the face of crisis.
“Unless this changes, investors will continue to question whether the region’s political and financial systems can deliver the stability they were designed to protect.”