France’s Political Turmoil Adds Headwinds to Europe but Limits Contagion Risks

Allianz Global Investors’ August 2025 France in the Spotlight note by Chief Economist Christian Schulz assesses how rising instability in Paris could affect markets and the eurozone.

• Prime Minister Bayrou’s confidence vote raises the risk of a snap election, driving French 10-year yields to 3.53% and pushing the CAC40 lower.

• Political paralysis is expected to persist until the 2027 presidential election, hindering fiscal consolidation and weighing on European growth.

• Broader contagion risks remain contained, as ECB tools and stronger fiscal discipline in smaller eurozone countries bolster systemic resilience.

Will France’s instability remain a local challenge or evolve into a pan-European risk? The full report provides deeper analysis.