Prime Minister Barnier to resign as France's political crisis deepens

French Prime Minister Michel Barnier was set to resign on Thursday after far-right and leftist lawmakers voted to topple his government, plunging the euro zone's second-largest economy deeper into political crisis.

Barnier, a veteran politician who became prime minister barely three months ago, will become the shortest-serving prime minister in modern French history when President Emmanuel Macron approves his resignation.

The two men met for over an hour, French media said, adding that Barnier had now left the Elysee presidential palace. However, there was still no official confirmation of his resignation.

Any new prime minister will face the same challenges that led to Barnier's downfall, notably pushing the 2025 budget through a deeply divided parliament at a time when France needs to fix ailing public finances.

Much focus will also be on Macron himself as he seeks to find a new prime minister.

Three sources told Reuters that he aimed to appoint a replacement swiftly, with one saying he wanted to do so before a ceremony to reopen the Notre-Dame Cathedral on Saturday, which U.S. President-elect Donald Trump and other international political leaders are due to attend.

The political turmoil in France further weakens a European Union already reeling from the implosion of Germany's coalition government, and comes just weeks before Trump returns to the White House.

The hard left and far right punished Barnier in a no-confidence vote on Wednesday evening for trying to push a social security budget through an unruly hung parliament without a vote.

"This is the logical conclusion of what France and its lawmakers are at the moment: a mess," 75-year old Parisian Paulo told Reuters.

Macron was due to give a televised address to the nation at 8pm (1900 GMT) on Thursday. French media said he would meet the head of the National Assembly at around noon and the head of the Senate at 1400 GMT.

Macron is 'Main Culprit'

Macron precipitated the ongoing crisis with an ill-fated decision to call a snap election in June. He has a mandate until 2027 but faces growing calls to resign.

"The main culprit for the current situation is Emmanuel Macron," Marine Le Pen of the far-right National Rally (RN) told TF1 TV late on Wednesday.

"The dissolution (of parliament in June) and censorship (of the government) are the consequence of his policies and of the considerable divide which exists today between him and the French."

A French president cannot be pushed out unless two thirds of lawmakers, meeting in High Court, decide he has gravely failed to fulfil his role, according to a never-invoked article of the constitution.

Some 64% of voters want Macron to resign, according to the Toluna Harris Interactive poll for RTL broadcaster. A small majority of voters approved of parliament bringing down Barnier, but many are worried about its economic and political consequences, the poll showed.

Under French constitutional rules, there can be no new parliamentary election before July.

"Until potential new elections, ongoing political uncertainty is likely to keep the risk premium on French assets elevated," SocGen analysts said in a note. "Political uncertainty is likely to dampen both investment and consumer spending."

The political uncertainty has been unnerving investors in French sovereign bonds and stocks for weeks.

French bonds and stocks rallied on Thursday on what some traders said was profit-taking following the widely expected outcome of the no-confidence vote. However, Thursday's relief rally doesn't reduce the uncertainty ahead for French markets.

The fall of France's government leaves the country without a clear path towards reducing its fiscal deficit and the most likely outcome is less belt-tightening than previously planned, credit rating agency Standard and Poor's (S&P) said.

Rival ratings agency Moody's said on Wednesday that the collapse of France's government was negative for its credit rating and added to the risks of a bigger debt burden than it had previously expected.