France Plunges Deeper Into Turmoil as PM Quits Just Hours After Cabinet Reveal
The political sands beneath France are shifting at an alarming pace, perhaps faster than many have ever witnessed.
Background
In a stunning development that sent shockwaves through European capitals and global financial markets, French Prime Minister Sebastien Lecornu tendered his resignation this Monday, October 6th, 2025
What makes this move particularly jarring, you ask.
It came less than 24 hours after President Emmanuel Macron had unveiled a brand-new cabinet, a lineup that, ironically, largely retained the same senior faces from previous administrations
It's a political bombshell that few saw coming, and it speaks volumes about the deep-seated challenges facing the Macron government.
It’s a scenario straight out of a political thriller, but with very real consequences for millions
This isn't just a minor reshuffle or a disagreement over policy; it's a dramatic deepening of France's already simmering political crisis.
One can almost hear the collective gasp from investors and citizens alike, suddenly left to wonder about the stability of the nation's leadership
Macron’s desperate attempt to project an image of stability with his new government has backfired spectacularly, leaving the nation—and indeed, the entire continent of Europe—grappling with profound uncertainty at a critical juncture
French Markets Reel as Political Crisis Deepens Financial markets were, as expected, quick to react, and not in a good way
French assets took a significant beating, with bonds plunging as investors scrambled to reassess risk and brace for potential fallout.
The yield on France’s benchmark 10-year notes, a key indicator of borrowing costs for the government, jumped by nine basis points, hitting 3
That's a level we haven't seen since late 2024, signaling serious jitters about the country's economic stability amid the political chaos.
When bond yields rise, it means the government has to pay more to borrow money, which can constrain public spending on vital services and raise uncomfortable questions about fiscal health
It's a clear vote of no confidence from the market, telling us they don't like what they're seeing in Paris right now, and they're pricing in a higher risk premium for French debt
“This isn’t just about a prime minister stepping down; it’s about the credibility of the entire political apparatus,” noted Sophie Huynh, a Portfolio Manager and Strategist at BNP Paribas Asset Management, weighing in on the unfolding situation
“Investors crave stability, and France, a core pillar of the Eurozone, is now radiating anything but.
It's going to make capital markets very skittish about European exposure in general, possibly leading to a broader flight to safety
” Indeed, the implications stretch far beyond the Champs-Élysées and the immediate French economy. Fabrice Pothier, CEO of Rasmussen Global, highlighted the broader European context.
“Macron’s presidency has been defined by attempts to lead Europe, to be the driving force behind EU integration and strategic autonomy.
But with this kind of domestic instability, his influence on the European stage will inevitably be curtailed
This creates a vacuum, potentially impacting everything from crucial EU budget negotiations and climate policy to defence strategy, precisely when the continent needs strong, unified leadership to navigate ongoing global challenges
” Japan's Divergent Path: Stimulus Hopes Amid Leadership Change Meanwhile, half a world away, another significant political drama was playing out, albeit with a very different flavour of market reaction
In Japan, the near-certain elevation of pro-stimulus lawmaker Sanae Takaichi as the nation’s next prime minister also sent tremors through financial markets
Here, the yen and long-term bonds tumbled, reflecting investor expectations of continued, aggressive monetary easing under Takaichi
This signals a commitment to battling deflation and stimulating growth through substantial fiscal and monetary tools.
Why the divergence.
Investors are betting that more stimulus will fuel corporate profits and economic activity, even if it significantly weakens the currency, making exports cheaper and boosting corporate earnings
Ludovic Subran, Allianz CIO and Chief Economist, put it succinctly: “Japan is facing its own unique set of challenges, particularly demographic ones, but the market’s reaction signals a clear expectation of continuity in economic policy – for better or worse, depending on your portfolio
Unlike France, where uncertainty reigns supreme, Japan seems to be charting a clear, if potentially risky, course with its aggressive stimulus measures
” What This Means for You, Especially in Southeast Asia For businesses, investors, and even everyday citizens across Southeast Asia, these developments aren’t just distant headlines; they carry very real-world implications that could affect livelihoods and economic stability in the region
The interconnectedness of today's global economy means tremors in Paris or Tokyo can quickly create ripples that reach far and wide
Currency Volatility and Investment Flows A weakening yen, while potentially making Japanese goods cheaper for import, also signals a global landscape where major currencies are in flux and predictability is low
For countries like Vietnam, Indonesia, or Thailand, whose economies are heavily reliant on exports and attracting foreign direct investment (FDI), this heightened uncertainty can be a significant concern
Investors might become more risk-averse globally, potentially diverting funds away from emerging markets, including those in ASEAN, towards safer havens, or simply holding back on new investments until the dust settles
This could impact job creation and economic growth projections across the region
Global Trade and Commodity Prices France’s instability, if it spirals further, could dampen economic growth in the Eurozone, one of the world’s largest trading blocs and a crucial market for Asian goods
A weaker Europe inevitably means less demand for goods manufactured in Asia, from electronics to textiles, potentially impacting export-oriented economies in Southeast Asia
Conversely, a strong Japanese stock market could indicate robust corporate health, potentially increasing Japanese investment or demand for raw materials from Southeast Asia
However, a weaker yen could also make Japanese exports more competitive against those from Southeast Asian nations, creating an added challenge for regional manufacturers
Tourism and Luxury Goods France remains a global beacon for tourism and high-end luxury goods, drawing millions of visitors and significant consumer spending
Prolonged political instability could deter international tourists, impacting global travel industries, including those that feed into or connect with Southeast Asia
For nations like Singapore or Malaysia, which act as regional hubs or significant luxury markets, a less buoyant European consumer base could have trickle-down effects on their retail and hospitality sectors
Geopolitical Shifts and Regional Stability Finally, and perhaps most broadly, France's internal struggles detract from its ability to project power and influence on the international stage
In a world already grappling with complex geopolitical tensions, from the South China Sea to ongoing conflicts in Europe, any weakening of key Western powers can subtly but significantly alter global dynamics
Southeast Asian nations, often adept at navigating between major global players, will be closely watching how these shifts might impact regional security, multilateral trade agreements, and diplomatic alignments
A less stable Europe might mean different priorities and engagement levels with the Indo-Pacific, requiring ASEAN countries to recalibrate their foreign policy
Conclusion: A World in Flux In essence, the events unfolding in Paris and Tokyo, though distinct in their immediate causes and market reactions, collectively paint a vivid picture of a global economy and political landscape in profound flux
France's crisis underscores the fragility of political mandates in established democracies and the direct link between political stability and investor confidence in core Eurozone economies
Japan's shift, while causing its own brand of market volatility, signals a continuation of expansionary monetary policies, a stark contrast to some Western economies contemplating tighter stances
Both scenarios contribute to a complex, multi-polar world where regional political events have immediate and sometimes contradictory global financial repercussions
For policymakers and businesses in Southeast Asia, this means a heightened need for agility, diversified strategies, and careful monitoring of these external headwinds and tailwinds
The world's economic and political currents are getting choppier, and everyone, no matter how far removed, will undoubtedly feel the ripple effects. What comes next for France.
Can President Macron regain control of his narrative and the nation’s governance, or is this just the beginning of a prolonged period of instability.
And how will Japan’s new leadership navigate its economic tightrope of aggressive stimulus amidst global inflation concerns
These questions linger, promising more twists and turns in an already tumultuous year, making vigilant observation a necessity for us all.
