France's Macron tasks his outgoing PM with holding last-ditch talks to end crisis

By Elizabeth Pineau, Michel Rose and Ingrid Melander

PARIS (Reuters) -French President Emmanuel Macron on Monday tasked his outgoing prime minister, who had resigned earlier in the day, to hold last-ditch talks with other political parties to try to chart a path out of the crisis.

Sebastien Lecornu had tendered his government's resignation only hours after announcing his cabinet line-up, making it the shortest-lived administration in modern French history and deepening the country's political crisis.

It was not immediately clear what Lecornu's task would entail. France's constitution allows Macron to reappoint Lecornu as prime minister, should he wish.

Macron gave Lecornu - who will hold meetings with political parties on Tuesday morning - 48 hours.

"The president has entrusted Mr Sebastien Lecornu, the outgoing Prime Minister in charge of day-to-day affairs, with the responsibility of conducting final negotiations by Wednesday evening to define a platform for action and stability for the country," the Elysee Palace said in a statement.

FRACTIOUS PARLIAMENT

Lecornu said he had accepted the president's request. His shock resignation announcement earlier drove stocks and the euro sharply lower.

Macron's options are narrowing. He could name a new prime minister. A figure from within his own camp appears unlikely, and until now he has been unwilling to name a leftist, as the left wants to dilute his hard-won pension reform and tax the rich, whilst his more right-leaning premiers have failed to find broad backing.

He could also choose to dissolve parliament and call snap elections, or resign.

In past months, Macron, whose mandate runs until May 2027, has repeatedly ruled out stepping down or calling elections as France has sunk deeper into crisis, most recently over trying to find support for a 2026 budget.

SNAP ELECTIONS ON THE HORIZON?

Lecornu resigned after allies and foes alike immediately threatened to topple his new government.

Far-right and hard-left parties immediately zeroed in on Macron, urging him to call new snap parliamentary elections or quit.

"This joke has gone on long enough, the farce must end," far-right National Rally chief Marine Le Pen said.

Mathilde Panot, of the hard-left France Unbowed, said: "The countdown has begun. Macron must go."

However, the Socialists said their preference was to avoid a snap election or a presidential resignation, and instead have Macron name a left-wing prime minister.

NEW CABINET LINE-UP ANGERED OPPONENTS

On the streets of Paris, many were shocked at the worsening instability.

"I've never seen this," said 79-year-old pensioner Gerard Duseteu. "I’m almost ashamed, even, to be French."

Some said fresh elections seemed like the only option. "We cannot continue like this," said 20-year-old political sciences student Marius Loyer.

Three-quarters of French people believe Lecornu was right to resign, while almost half blame Macron for France's turmoil, according to an Elabe poll for BFM TV on Monday.

A relative majority believe that either dissolving parliament or Macron stepping down would break the stalemate.

Two further polls from last month show that in the event of snap parliamentary elections, the RN would emerge the dominant bloc in a parliament still divided into three blocs, with none holding a majority.

FRENCH STOCKS AND EURO FALL

Paris' $3 trillion CAC 40 dropped more than 1.3% on Monday, making it the worst-performing index in Europe. The euro, which has weathered much of France's political turmoil in the last year, slid 0.2% on the day to $1.172.

Lecornu's two predecessors were brought down by parliament over efforts to rein in France's public spending at a time when ratings agencies and investors are watching closely.

France's debt has risen to 113.9% of gross domestic product, while the deficit was nearly double the European Union's 3% limit last year.

BIGGEST CRISIS IN FRANCE'S MODERN POLITICAL HISTORY

France has rarely suffered a political crisis so deep since the creation in 1958 of the Fifth Republic, the current system of government.

The 1958 constitution was designed to ensure stable governance by creating a powerful and highly centralised president endowed with a strong majority in parliament.

Instead, Macron - who in his ascent to power in 2017 reshaped the political landscape - has found himself struggling with a fragmented parliament.

France is not used to building coalitions and finding consensus. 

(Reporting by Elizabeth Pineau, Benoit Van Overstraeten, Michel Rose, Sudip Kar-Gupta, Inti Landauro, Alessandro Parodi, Richard Lough, Johnny Cotton, Amanda Cooper, Dominique Vidalon; Writing by Ingrid Melander; Editing by Gareth Jones, Sharon Singleton, Ros Russell)