French stocks and bonds sold off for a second session after Prime Minister Francois Bayrou called a 8 September confidence vote that could topple his minority government. The benchmark CAC 40 fell about 2% on Tuesday, extending a 1.6% decline from the previous day, while the yield on 10-year OATs crept up to roughly 3.52%. Bank shares bore the brunt of the retreat, with BNP Paribas sliding 6.2% and Societe Generale dropping 5.2%, as investors questioned policy stability in the euro-area’s second-largest economy. The yield premium that French debt commands over Italian bonds narrowed to just 9.8 basis points, the tightest since 1999, underscoring the rise in France-specific risk. Bayrou has tied the vote to passage of a 2026 budget that would trim spending by about €44 billion, freeze welfare and pension outlays, and keep income-tax brackets unchanged. He argues the measures are needed to curb a deficit that reached 5.8% of GDP in 2024 and to arrest what he calls the country’s “chronic” dependence on debt. Opposition parties spanning the far-right National Rally to the Socialists and Greens have already said they will withhold support, making a government defeat a distinct possibility. Analysts warn that failure would either force President Emmanuel Macron to name a new premier or call fresh elections, prolonging political uncertainty and keeping pressure on French assets.