France's Macron has 48 hours to choose a new Prime Minister: who could it be?

Market attention turns again to France on Thursday after President Emmanuel Macron's office said last night that he will appoint a new prime minister in the next 48 hours.

Macron thanked outgoing Prime Minister Sebastien Lecornu for his efforts to hold final talks with several parties on whether there could be a way out of France's ongoing political quagmire without holding new parliamentary elections, which would likely benefit the far right.

With Lecornu's departure confirmed, Macron now turns to the daunting task of choosing a prime minister who can find a compromise with rivals over the state budget and the urgent task of reducing France's deficits and debt pile.

Macron would ideally like to leave the hard-won reforms, especially his unpopular pension reforms, alone, but there are rumors that these may need to be adjusted or scrapped altogether as a way to reach a compromise between a new minority government and other parties – particularly the Socialist Party, which is seen as a kingmaker – who might be willing to support a new prime minister, but at a high price.

As with so many things in French politics over the past year, arguments about this are already emerging, with the centre-right party Les Republicains saying they do not want to see a review of the pension reform.

“Regardless, there has to be a political solution at some point,” Eric Chaney, economic adviser at the Institut Montaigne and former chief economist at AXA, told CNBC, but he said freezing or canceling the pension reform would be costly in more ways than one.

“Firstly, there would be budgetary costs of approximately 13 billion euros [$19.6 billion] per year if this pension reform is frozen,” Chaney told CNBC's Charlotte Reed in Paris on Thursday.

'The second reason is that one of the most important points of the pension reform is raising the retirement age to 64 [from 62]which is not much compared to other European countries, and it has caused the labor market participation rate of seniors to increase… so if you take that away, you have less production, less GDP, less tax revenue for the government,” Chaney said.

“But the third reason is even more important, and it is political. Because if you cannot implement any pension reform, what kind of reform can you implement in this country? That would be a catastrophe,” he added.

Macron is being urged not to choose another centrist ally as prime minister given Lecornu's resignation or the ouster of Francois Bayrou and Michel Barnier, whose governments were toppled by rival parties and votes of no confidence in the past year.

There is hope that by choosing a candidate who does not come from Macron's own ill-fated and unpopular political stable, a budget will have a better chance of being approved.

That is crucial for the eurozone's second-largest economy, which has the third-largest debt pile after Greece and Italy. The French budget deficit amounted to 5.8% of gross domestic product in 2024.

Nabil Milali, portfolio manager at Edmond de Rothschild Asset Management, told CNBC on Thursday that Macron could be tempted to choose a more “neutral” figure or technocrat this time.

“Probably, after trying three people from the centre-right, he will choose a more neutral figure to lead a technical government whose only mission is to vote on any budget before the end of the year,” Milali said.

“There are at least two problems in this scenario – first is finding this rare gem, a political figure who is sufficiently neutral for both left and right. The second is that concessions will still have to be made to the Socialist Party, which is still the kingmaker in the current National Assembly, and the main sticking point is still pension reform.”

However, Milali warned that abolishing the pension reform would prove costly for Macron, as it is the only real structural reform of his second term and a key part of his political legacy, and for France in terms of the financial market's response.

After Lecornu resigned on Monday, Macron asked him to hold final talks with rival parties for 48 hours to see if there was a way out of the political deadlock that has gripped France for months and toppled successive minority governments.

In concrete terms, Lecornu was looking for a way to prevent parliament from being dissolved and new parliamentary elections from being called.

Lecornu said on Wednesday evening that these talks had shown that a majority of lawmakers were against the dissolution of parliament and that a “platform for stability” exists. Earlier in the day, he had also said he believed it would be possible to have a 2026 budget ready by the end of the year.

Macron and his centrist bloc are keen to avoid new elections because a vote would likely benefit Marine Le Pen's anti-immigration National Rally party. It currently tops voter polls, with around 32% of the vote, compared to 25% of the vote held by the left-wing alliance, the New Popular Front.

Given the polls and the smell of blood, both the far left and the far right are calling for new elections, convinced that they can entice voters to vote decisively this time after last summer's inconclusive elections. These were called for by Macron in an attempt to achieve 'clarity', but instead achieved all but becoming the source of the ongoing crisis that continues to plague France today.