French Government Faces Confidence Vote Amid Budget Crisis

France's minority government is at risk of being ousted next month after three main opposition parties voiced their refusal to support a confidence vote announced by Prime Minister Francois Bayrou for September 8. The vote surrounds his sweeping budget cut plans, which the far-right National Rally, the Greens, and the Socialists have opposed.

Consequently, investor anxiety has surged, driving French bond risk premiums above their German counterparts by 5 basis points, the highest since mid-June. The CAC-40 index fell 1.6% amid these developments. If the government is toppled, President Emmanuel Macron may appoint a new prime minister, retain Bayrou as caretaker, or call for early elections.

Bayrou admits the risk of seeking confidence in a divided parliament but argues inaction is even riskier due to France's substantial debt. The confidence vote will determine parliamentary backing for his 44 billion euro budget cuts. Socialist votes will be crucial, with a potential general protest looming as unions mobilize on social media.

(With inputs from agencies.)