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Investing.com -- The CAC 40 index fell around 2% on Monday following the sudden resignation of Prime Minister Sébastien Lecornu, who stepped down just 27 days after forming his cabinet.
The announcement heightened political uncertainty in France and drove losses across the market.
The biggest drag on the index was the banking sector, with BNP Paribas, Société Générale and Crédit Agricole falling between 4.3% to 5.8%.
Capital Economics said the resignation “hammers home how the fractured parliament is making it nearly impossible to pass a budget that reduces the fiscal deficit.”
“This strengthens our conviction that with government borrowing running at more than 5% of GDP and the debt ratio rising, the risk premium on French government bonds will continue to widen,” the brokerage added.
The resignation follows a period of political instability in France, and comes just hours after Lecornu formed his cabinet. The move comes amid challenges in forming a stable government able to address budget and fiscal issues.