France to release diesel reserves as student protests resume

France will release 10 million barrels from its strategic diesel reserves to ease cost of living pressures, Prime Minister Sebastien Lecornu said on Wednesday, as he seeks to quell public unrest amid large-scale protests over underfunding in education.

Lecornu said in a televised address that the protesters' anger "did not come out of nowhere," and acknowledged the public felt "fatigue" about a string of crises.

The release from France's diesel stockpile at cost price, bought before the U.S.-Iran war caused a global energy price surge, is set to bring down prices at the pump by 12 to 18 euro cents per litre of diesel, Lecornu said.

The Group of Seven nations, of which France is a member, last week agreed to release 100 million barrels of reserves, after the Trump administration pushed Europe to deploy its stocks. Middle East disruption and Ukrainian attacks on Russian refineries are exacerbating a global squeeze on refined products, prices of which are set to remain elevated into next year.

Hundreds of French schools will be closed on Thursday amid a nationwide protest by high school and college students dubbed "semaine noire," or "black week," which has seen blockades erected in many cities. The government suspended the use of stun grenades after a 15-year-old boy's hand was blown off earlier in the week, fueling accusations of police brutality.

Protesters say years of underinvestment have left French schools overcrowded, run-down, under-resourced and under-staffed.

Wider discontent swirls in France over living standards and wages, strained public services, political dysfunction, immigration and security, boosting the popularity of the far-right National Rally and left-wing New Popular Front alliance at the expense of the incumbent center-right government.

But their complaints come as Lecornu's government seeks to rein in public spending to appease skittish bond markets, which have punished France more harshly than many of its peers this year, amid a global bond market rout.

France's benchmark borrowing cost has climbed by around 1.26 percentage points this year to its highest level since 2002, while its risk premium over Germany's has nearly doubled.

The yield on French 10-year government bonds, known as OATs, was last seen 3 basis points higher at around 4.9% on Thursday.

Lecornu is seeking to pass a budget that involves slashing around 43 billion euros ($48.1 billion) in public spending through a divided parliament in which he does not command a majority. Analysts say he may resort to emergency powers to do so, a move which has ended up toppling some of his predecessors.

France has had six prime ministers in five years, with volatility exacerbated after the 2024 parliamentary election resulted in no majority.

Lecornu said in his Wednesday speech that the government was taking action on fiscal consolidation because "making these decisions today, sharing the burden fairly, will help avoid far more drastic measures down the line."

"It is parliament's responsibility, indeed its foremost responsibility, to provide the country with a budget. I therefore appeal to everyone's patriotism so that the ongoing discussions lead to the necessary compromise," Lecornu said, adding that it was crucial to bring the public deficit to 5% by 2027. The deficit is projected at 5.4% this year.

National Rally's presidential candidate Marine Le Pen, widely considered a frontrunner in the 2027 contest, used a speech earlier this week to boast her own commitment to fiscal responsibility, claiming her party would bring the overall deficit below the 3% threshold within 18 months.

Davide Oneglia, director of European and global macro at TS Lombard, said in a Wednesday note that the market "remains unconvinced (correctly) about her promises," observing that while French borrowing costs fell immediately following her remarks, the gap in French yields over Germany's soon widened to its pre-speech level.