(Bloomberg) — Prime Minister Francois Bayrou called a confidence vote that may topple France’s government as soon as next month, prompting a selloff in French assets as investors hedged for more political uncertainty.

The far-right National Rally party, the leftist France Unbowed and the Greens all said they would vote against the Sept. 8 motion while the Socialists said they wouldn’t back the government. If a majority of lawmakers vote against Bayrou, he’ll be forced to submit his government’s resignation.

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The failure of another French government — the previous prime minister, Michel Barnier, lasted only 90 days — would underscore the tenuous position of President Emmanuel Macron, whose party and its allies lost any semblance of a parliamentary majority in 2024. Marine Le Pen’s National Rally, which became the largest party in the lower house in that vote, is calling for a new election.

“Yes it’s a risk, but the supreme risk is doing nothing,” Bayrou told reporters during a press conference in Paris on Monday. “There’s no getting out of this situation if we are not brave.”

The yield on 10-year French debt rose nine basis points to 3.51%, leading global bond market losses. The nation’s borrowing premium over Germany widened by five basis points to close at 75 basis points, the most since April and up from 65 in late July.

France’s 10-year yields are now among the highest in the bloc, having already surpassed countries once at the heart of the European sovereign debt crisis such as Greece and Portugal. The moves on Monday left it about eight basis points below Italy’s.

What Bloomberg Economics Says...

“Opposition parties seem inclined to oppose the motion. Unless they backtrack, the government will fall.”

—Antonio Barroso and Jean Dalbard. For full note, click here

A Barclays basket of stocks containing companies most exposed to French domestic risks, including the government budget, dropped 2.9% on Monday.

“Those investors who bought Europe on the belief that Germany somewhat represented the potential of the euro zone made a mistake,” Vincent Juvyns, chief investment strategist at ING in Brussels, said in an interview Tuesday. “It’s a two-tier Europe we have now with some countries like Germany that can afford to spend on growth and those who have no choice but to consolidate their public finances.”

Bayrou is calling the confidence vote in an effort to consolidate support after facing pushback against €44 billion ($51 billion) of spending cuts and tax increases that he considers vital to avert disaster for France’s public finances. He also proposed abolishing two of France’s public holidays, drawing scorn from the opposition.

Bayrou said that Macron agreed to call parliament back into session early in order to allow the government to present its plan and to hold the confidence motion.

“We will obviously vote against confidence in François Bayrou’s government,” Le Pen said in a social media post. “François Bayrou clearly has not understood that the French are fully aware of the economic and financial crisis in which our country has been plunged after eight years of Macronism.”

France’s domestic problems are growing as Macron struggles on the international stage. Last month, the French president went to the White House with German Chancellor Friedrich Merz and the UK Prime Minister Keir Starmer among others to plead with President Donald Trump to stand behind Ukraine. The European leaders are also in the middle of a bruising trade fight with the US.

The turmoil in Paris calls into question how much longer this government can last and whether Macron will be tempted to call another snap parliamentary election to try to shore up his support.

France’s next presidential election is scheduled to be held in April or early May 2027. The only way that timing could be changed would be if Macron was unable to fulfill his duties or if he resigned, something he has said he won’t do before the end of his term.

French borrowing costs have increased relative to peers and the country now has the widest budget deficit in the euro area. On France Inter radio Tuesday, Finance Minister Eric Lombard said the country is currently on track to meet its budget deficit of 5.4% of GDP for this year.

If the government were to collapse, Lombard said France’s borrowing costs would rise above Italy’s “within 15 days,” adding that “we will be really the last of the 27 in Europe.”

Bayrou gave an advance outline of his 2026 budget in July in a bid to garner support over the summer break. He made a point of not taking vacation, instead remaining principally in Paris and launching a YouTube channel called ‘FB Direct’ to explain his tax-and-spend choices.

But the efforts have done little to win over public opinion and Bayrou’s popularity has sunk to record lows for any prime minister during Macron’s presidency. The contention risks spilling over into street protests as a call on social media to “block everything” on Sept. 10 has garnered support from several political groups.

“If the path we choose is to pretend the problem doesn’t exist, we will not escape,” Bayrou said. “We won’t escape as a state and a society because our freedom and sovereignty is at stake.”

—With assistance from Greg Ritchie, Julien Ponthus and Francois de Beaupuy.

(Updates with analyst comment in the eighth paragraph.)

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