French Stocks, Bonds Rally After French Premier Lecornu Compromises To Win Socialist Party Support To Avoid Ouster

Prime Minister Sébastien Lecornu pulled off the impossible – for now – by suspending President Emmanuel Macron’s 2023 pension reform, which raised the retirement age. The desperate political maneuvering was aimed at securing crucial support from the Socialist Party in France’s National Assembly to survive no-confidence votes on Thursday, where Marine Le Pen’s National Rally has vowed to try to topple him.

French bond markets rallied on the news. The 10-year yield fell seven basis points to 3.4%, the lowest since mid-August, narrowing the spread over German Bunds to 79 bps. This is one of the sharpest intraday tightening moves this year. France’s CAC40 reversed most of the session’s losses as it appears Macron’s last-ditch effort of doing whatever it takes to avoid a snap election has paid off – for now. 

“France’s CAC 40 benchmark closed the session 0.2% lower, after reversing most of the day’s losses. The index had fallen as much as 1.4% in early trading. A Barclays Plc basket containing companies most exposed to French domestic risks turned positive in afternoon trading and ended up 0.7% on the day, led by gains in lender Societe Generale SA, construction company Vinci SA, and telecommunications provider Orange SA,” Bloomberg EMEA Equities Managing Editor Blaise Robinson wrote in a BBG Top Live Blogs post. 

Bloomberg Opinion analyst Lionel Laurent noted, “It looks like Emmanuel Macron’s last-ditch strategy of doing whatever it takes to avoid snap elections has paid off. Prime Minister Sébastien Lecornu appears to have clinched the support of the center-left Socialists by suspending pension reform until the 2027 presidential elections,” adding, “Meanwhile, the weakened and divided center-right Republicans are also likely to back Lecornu rather than face a potential bruising at the ballot box. That’ll be enough for this government to live to fight another day, and for markets to breathe a sigh of relief. Don’t bet on a lasting peace, though.” 

On Thursday, Lecornu’s government faces no-confidence votes, backed by Le Pen’s National Rally and far-left parties. After Macron’s pension reform news, the Socialist Party said it would not vote to oust Lecornu. 

“I will propose to parliament that we suspend the 2023 pension reform until after the presidential election,” Lecornu said. “There will be no increase in the retirement age between now and January 2028.”

He continued, ”Some would like to see this parliamentary crisis turn into a crisis of the regime. That will not happen thanks to the institutions of the Fifth Republic and its supporters.”

Macron’s grip on power has eroded since last year’s failed snap elections. He has given Lecornu “carte blanche” to restore stability and end one of the worst political crises for France in years. If Lecornu loses the confidence vote on Thursday, Macron will be forced to dissolve parliament and call new elections. 

Two of Lecornu’s predecessors, Michel Barnier and Francois Bayrou, have already resigned over their plans to rein in out-of-control spending, which has led to France having the largest budget deficit in the bloc. 

Suspending pension overhaul marks a major retreat from Macron’s economic reform agenda, which had goals to make France “work more” to sustain growth and repair public finances.

National Rally’s Jordan Bardella wrote on X, “The only common denominator of this majority without rhyme or reason, ready for all sorts of deal-making, is the fear of the ballot boxes and the fear of the people.” 

À l’Assemblée nationale, des Républicains au PS, c’est l’amicale des sauveurs d’Emmanuel Macron qui se succède à la tribune.

Le seul dénominateur commun de cette majorité sans queue ni tête, prête à tous les marchandages, c’est la peur des urnes et la peur du peuple. #DirectAN

— Jordan Bardella (@J_Bardella) October 14, 2025

Bardella continued, “With the Faure-Macron pact, the Socialist Party allows the President of the Republic to pursue a policy massively rejected by the French. If there remains a bit of coherence and honor among certain PS deputies, they will have to make it known this Thursday during the vote on the motions of censure. Or accept, before history, to have turned their backs on the French people, ignored their expectations and their sufferings.” 

Avec le pacte Faure-Macron, le Parti socialiste permet au président de la République de poursuivre une politique massivement rejetée par les Français.

S’il reste un peu de cohérence et d’honneur à certains députés du PS, ils devront le faire savoir ce jeudi lors du vote des…

— Jordan Bardella (@J_Bardella) October 14, 2025

All eyes on Thursday.