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Investing.com -- French banks weighed on European markets on Tuesday as renewed political uncertainty in Paris sent the CAC 40 lower.
Shares of BNP Paribas, Société Générale and Crédit Agricole fell between 5% and 6.7% at 06:03 ET (10:03 GMT).
The benchmark index fell 1.8%, with financial stocks leading the decline. Investors reacted to heightened tensions around France’s 2026 budget process after Prime Minister François Bayrou announced he would seek a vote of confidence on September 8 in an attempt to push through a tighter fiscal plan.
The move follows weeks of criticism from opposition parties over Bayrou’s €43.8 billion package of cuts and revenue measures aimed at bringing the budget deficit down to 4.6% of GDP in 2026, said analysts at UBS in a note.
France recorded the highest budget deficit in the eurozone last year at 5.8% of GDP and remains under EU monitoring.
With his government lacking a parliamentary majority, Bayrou faces the risk of defeat in the confidence vote, which could trigger either the appointment of a new prime minister or fresh elections by President Emmanuel Macron, UBS added.
Markets have grown wary after last year’s collapse of Michel Barnier’s government, which failed to pass the 2025 budget.
That episode sparked a spike in French government bond spreads, and strategists warned that the current political standoff could prompt renewed volatility.
The French 10-year yield already trades well above German bunds, reflecting investors’ concerns over fiscal stability.