French student protests pause and pressure mounts amid budget impasse

Student protests in France took a break on Wednesday after weeks of unrest, but market pressure on the French government intensified ahead of crucial budget negotiations due to begin next week.

Student rallies, now entering their third week after violent clashes with police, mass school closures and thousands of arrests, are expected to resume on Thursday. What started as a Parisian student protest pressuring the government to tackle teacher shortages, long hours and abandoned schools, has grown into a national movement that has garnered support from people of all ages.

Prime Minister Sébastien Lecornu said Wednesday morning that officials would take advantage of the break in protests to open dialogue with high school students. He is due to address the nation on Wednesday evening.

“The requests (from students) are numerous and vary from one high school to another. They must be evaluated objectively, school by school,” he said Tuesday in a post on

But he added that conversations must take place “without giving in to politicized manipulation.”

The Lecornu government accused the radical left party La France Insoumise (LFI) of hijacking the student movement. Some party politicians have publicly supported the student protests.

LFI did not respond to CNBC’s request for comment.

The unrest in France has highlighted and intensified the economic and political challenges facing the country.

In the coming weeks, the French government will face tough budget negotiations, during which it will have to convince lawmakers in the politically divided National Assembly – which includes the far-right National Rally, the left-wing New Popular Front and Lecornu’s center-right group – to accept a budget adjustment worth tens of billions of euros.

Since France’s July 2024 snap elections yielded no parliamentary majority, budget conflicts have sparked political discord, with two administrations ousted in votes of no confidence. It took outgoing leader Lecornu until February this year to pass the 2026 budget, which he only achieved through emergency legislation that allowed him to bypass Parliament and impose the policy.

Further political changes are expected after next spring’s presidential election, with far-right candidate Marine Le Pen currently leading the field. In a speech on Tuesday, Le Pen pledged to reduce France’s deficit to 3% within 18 months of the election if she won – but critics questioned whether her plans were feasible. The French budget deficit exceeded 5.1% of GDP last year.

Political instability, deficit concerns and doubts about the minority government’s ability to cut spending on the necessary scale have also rattled investors trading French public debt. Yields on French government bonds, known as OATs, rose to multi-decade highs this year, sparking fears that the country could be heading toward a sovereign debt crisis.

Bond yields and prices move in opposite directions.

Bank of France Governor Emmanuel Moulin, who sits on the European Central Bank’s Governing Council, rejected the idea that France may soon need help from European Central Bank policymakers in Frankfurt.

The ECB does not exist to “deal with the budgetary problems” of each country, he told France Inter radio.

“It’s there to fight inflation and keep inflation around 2%,” he said. “The conditions are therefore not met today for intervention by the ECB.”

The performance of the French benchmark index OAT 10 years gained 16 basis points on Wednesday, up sharply after a decline the day before. The yield on the 10-year OAT has jumped by more than 100 basis points since the start of the year.

Emmanuel Roman, CEO of asset management giant Pimco, told French newspaper Le Monde that “the situation is critical” in the French bond market, which he said “sends a serious signal” to the government.

“The deficit must be reduced – a budget is necessary, and this budget must be passed,” he said in an interview published Wednesday. “France needs a credible political policy, which it currently lacks.”

Roman added that the country “needs reforms like those Italy had to implement when its back was against the wall.”

“There is an urgent need to take serious measures,” he said.

Anthony Brinkman, high-yield portfolio manager at Principal Asset Management, told CNBC in an email Wednesday that French debt markets could still come under more pressure.

“We remain cautious on French credit: the liquidation of OATs does not seem to be exhausted and we do not think that the curve has found its equilibrium price,” he declared.

“This looks like a reassessment of deteriorating fundamentals, rather than a disorderly market move. A worsening deficit and debt-to-GDP outlook have led to a gradual widening as negative news comes in. With assessments coming from Moody’s and S&P in the fourth quarter, rating downgrades could amplify selling pressure.”