The possible fall of the government could weaken France on the European stage, reports Euronews.
Economists are keeping a close eye on the French political arena ahead of the 8 September vote of confidence, which could lead to the resignation of the government.
Prime minister François Bayrou has pledged the government's confidence in an attempt to win MPs over to his budget recovery plan. France could be set to get its third government in a year, instability that does not please the markets.
"Clearly, the markets are watching the situation and thinking about what it could mean. And of course, if the political turmoil were to worsen, that could put pressure on French bond yields. And that in itself is of course negative for the French economy because higher interest rates mean that investment becomes more expensive," Bruegel economist Guntram Wolff told Euronews.
"Political instability generally leads to a certain loss of investor confidence. We need to be clear that any major political unrest will have consequences for investors, both in France, but also for foreign investors who are thinking of France as an investment destination."
France's debt continues to grow, so Bayrou wants to make savings of €44 billion by 2026 to bring the public deficit below 3% by 2029. In particular, he proposes to reduce public spending, combat tax fraud and abolish two public holidays.