As Nepal burns, here’s what is happening in France as Prime Minister Bayrou gets ousted

While the whole world has its eyes on the Gen Z protest in Nepal, the European country, France, has plunged deeper into another political uncertainty this week following the fall of yet another government. Prime Minister Francois Bayrou and his centrist minority administration were toppled on Monday after losing a no-confidence vote, with 364 lawmakers rejecting his leadership.

The collapse came as no surprise after Bayrou failed to build consensus on his 2026 budget plan, which sought to trim the country’s fiscal deficit from 5.8% of GDP in 2024 to 4.6% by 2026. His proposal included €44 billion ($52 billion) in spending cuts, but it failed to gain support across party lines.

Despite the political upheaval, financial markets remained relatively steady. The CAC 40 index opened slightly higher on Tuesday, while the yield on France’s 10-year benchmark bond ticked up to 3.4755%, signaling investor caution.

Bayrou is expected to submit his resignation to President Emmanuel Macron, who must now appoint a replacement, his fifth prime minister in under two years. Macron faces unappealing options: install another centrist ally, form a technocratic government, or call fresh elections, each carrying political risks.

Analysts suggest Macron will likely opt for a centrist figure capable of building bridges between the centre-right and centre-left while resisting pressure from the far-right National Rally and far-left France Unbowed, both of which are demanding snap elections.

Adding to the challenge, unions have called nationwide protests against austerity for September 10 and 18, amplifying public anger over proposed welfare cuts and reforms. Meanwhile, rating agencies are closely watching France’s fiscal situation.

Fitch Ratings, which currently assigns France an ‘AA-’ with a negative outlook, is due to release an update this week. Economists caution that a downgrade is possible, though a full-blown financial crisis remains unlikely for now.