Markets remain unmoved by suspension of French pension reform

Tuesday 14 October 2025 - 16:00

By: Sahili Aya

Markets remain unmoved by suspension of French pension reform

Paris — The suspension of France’s controversial pension reform failed to stir financial markets on Tuesday, as investors cautiously welcomed signs of short-term political stability but warned that deeper fiscal problems remain unresolved.

The CAC 40 fell only 0.5% after Prime Minister confirmed both budgetary measures and the temporary suspension of the pension reform during his policy speech before the National Assembly. Government bond yields also remained stable, indicating that traders are more concerned with long-term fiscal risks than immediate political uncertainty.

“The prospect of a temporary suspension of the pension reform, raised last week, was seen as a breath of fresh air by the market,” explained Alexandre Baradez, strategist at IG. Investors, he added, were mainly trying to avoid another dissolution of Parliament.

While the announcement calmed nerves, analysts warned that France’s structural deficit problem remains intact. “The suspension delays, rather than solves, the underlying fiscal issue,” said Baradez.

France’s ten-year borrowing rate, which had briefly risen to 3.6% last week after the resignation of Defense Minister Sébastien Lecornu, has eased to 3.4%, while the yield spread with Germany narrowed from 90 to 83 basis points.

Still, the CAC 40 lags behind other major European indices, up only 6.7% since January compared with 20% for Germany’s DAX. Investors continue to penalize France for its political instability and unsustainable debt trajectory.

Ratings agency Fitch downgraded France in September, and Moody’s and S&P are expected to issue their own verdicts later this autumn — likely with similar concerns about the country’s public finances.