The French crisis has taken an unexpected turn! Macron's allies have publicly turned against each other, clouding the prospects for the euro

The resignation of Sebastian Le Corny, the French prime minister, shows that the current crisis in French government is very different from previous ones - this time it is not the opposition that has brought down the government, but key allies within the ruling coalition.

Since then, President Emmanuel Macron has faced a broader rebellion that accelerated this week as former prime ministers publicly condemned the president's handling of the political impasse in the National Assembly.

The most striking criticism came from Gabriel Attar, a political prote ́ ge ́, who became prime minister at the start of 2024 as the youngest ever, only to step down months later when Mr. Macron suddenly announced early parliamentary elections. The decision was not even informed in advance of Mr. Attar and other key aides, and the political prote ́ ge ́ has since gradually distanced himself from his mentor.

Speaking before television cameras on Monday evening, Mr. Attar, leader of Mr. Macron's centrist coalition in parliament, confessed that "like many French people, I no longer understand the president's decision", noting that the head of state had "left a sense of unrelenting control".

Edouard Philippe, the first prime minister of Mr. Macron's first term as president, issued a shock call for early presidential elections on Tuesday morning, describing the situation as "a sad political game" and noting that "the political crisis is causing deep anxiety and disappointment among French citizens".

He further stressed: "We must not allow the chaos of the past six months to continue for another 18 months, which would be unbearably long." In his view, "this crisis is by no means a simple game of political show and ambition,Ava ForexIt's a profound crisis of governance. "

On Tuesday evening, it was Elizabeth Borne's turn to speak out. The politician, who served as prime minister from May 2022 to January 2024, has proposed a plan that could both defuse the current crisis and upend Macron's legacy - suggesting a moratorium on the implementation of controversial pension reforms.

Mr. Borne was responsible for pushing through reforms to raise the minimum retirement age from 62 to 64, a highly controversial policy that triggered a steady wave of negotiations and protests.

Although the reform bill was passed two years ago, it has always been the focus of controversy in French politics. Both the left and the far right have continued to call for the bill to be revised or even repealed outright.

Freezing the reform could open the way for negotiations with the Socialists to avoid the dissolution of parliament, but a halt to the landmark reform would be a highly symbolic blow to Mr. Macron's legacy.

Perhaps this is a necessary sacrifice to avoid a deeper crisis and vicious circle for the French political system. After all, a complete paralysis of national governance will undoubtedly leave Macron with a more painful political legacy than a setback in reform.

The increase in political uncertainty has directly pressured the euro

Public denunciations by pointed persons such as former prime ministers Atal, Philippe and Borne have exposed deep fissures in the leadership. This high-level infighting sends a strong signal to the market that the government is no longer functioning effectively, and is bound to undermine international investors' confidence in French assets and the euro.

The disintegration of the ruling coalition means that the government's ability to implement any fiscal reforms or address economic challenges in the future will be greatly compromised. The sharp increase in "policy uncertainty", which the market hates most, will directly lead to capital outflows, putting downward pressure on the euro.

The recent political turmoil in France has seen a significant market reaction. The exchange rate of the euro against the US dollar has fallen continuously in the previous four trading days. On Friday, the euro against the US dollar remained in a narrow range around the low level of 1.1570 in the Asian market.

"French Risk" Euroization: France's political crisis is no longer just a domestic affair. It has heightened concerns about political stability within the eurozone, reminiscent of the European debt crisis of the past. If markets lose confidence in French fiscal discipline, the spread over German government bonds (Spreads) could widen significantly, reviving talk of "eurozone fragmentation," one of the most fundamental risks facing the euro.

At 10:45 Beijing time, the euro was trading at 1.1569/70 against the dollar.