French opposition MPs have brought the government down, throwing the European Union's second-biggest economic power deeper into a political crisis that threatens its capacity to legislate and rein in a massive budget deficit.

Far-right and left-wing MPs joined forces to back a no-confidence motion against Prime Minister Michel Barnier and his government, with a majority 331 votes in support of the motion.

Barnier now has to tender his resignation and that of his government to President Emmanuel Macron, making his minority government's three-month tenure the shortest lived in France's Fifth Republic, which began in 1958.

He is expected to do so in the morning.

French Prime Minister Michel Barnier removes his glasses after he delivered a speech during a debate on two motions of no-confidence against the French government. – Reuters

The hard left and far right punished Barnier for opting to use special constitutional powers to adopt part of an unpopular budget without a final vote in parliament, where it lacked majority support.

The draft budget had sought €60 billion ($63.07 billion) in savings in a drive to shrink a gaping deficit.

"This (deficit) reality will not disappear by the magic of a motion of censure," Barnier told MPs ahead of the vote.

He added that the budget deficit would come back to haunt whichever government comes next.

No French government had lost a confidence vote since Georges Pompidou's in 1962.

Macron had ushered in the crisis by calling a snap election in June that delivered a polarised parliament.With its president diminished, France now risks ending the year without a stable government or a 2025 budget, although the constitution allows special measures that would avert a US-style government shutdown.

Hard left France Unbowed leader Mathilde Panot demands Macron's resignation. – Reuters

France's political turmoil will further weaken a European Union already reeling from the implosion of Germany's coalition government, and weeks before US president-elect Donald Trump returns to the White House.

The country's outgoing defence minister Sebastien Lecornu warned the turmoil could impact French support for Ukraine.

The hard left France Unbowed (LFI) party demanded Macron's resignation.

"With the no-confidence motion, all of the politics of Emmanuel Macron have been defeated and we demand that he goes," said LFI president Mathilde Panot.

Macron has last say on his resignation, says far-right leader Le Pen. – Reuters

Barnier's demise was cheered by far-right chief Marine Le Pen, who has sought for years to portray her National Rally party as a government in waiting.

"I'm not pushing for Macron's resignation," she said.

"The pressure on the president will get greater and greater. Only he will make that decision."

France now faces a period of deep political uncertainty that is already unnerving investors in French sovereign bonds and stocks. Earlier this week, France's borrowing costs briefly exceeded those of Greece, generally considered far more risky.

Macron must now make a choice. The Elysee Palace said the president would address the nation on Thursday evening.

RN president Jordan Bardella does not call for Macron's resignation. – Reuters

Three sources said Macron aimed to install a new prime minister swiftly, with one saying he wanted to name a premier before a ceremony to reopen the Notre-Dame Cathedral on Saturdaywhich Trump is due to attend.

Any new prime minister would face the same challenges as Barnier in getting bills, including the 2025 budget, adopted by a divided parliament.

There can be no new parliamentary election before July.

Macron could alternatively ask Barnier and his ministers to stay on in a caretaker capacity while he takes time to identify a prime minister able to attract sufficient cross-party support to pass legislation.

French President Emmanuel Macron. – Reuters

A caretaker government could either propose emergency legislation to roll over the tax-and-spend provisions in the 2024 budget into next year, or invoke special powers to pass the draft 2025 budget by decree – though jurists say this is a legal grey area and the political cost would be huge.

Macron's opponents also could vote down one prime minister after the next.

The upheaval is not without risk for Le Pen, who has for years sought to convince voters that her party offers a stable government in waiting.

"The French will harshly judge the choice you are going to make," Laurent Wauquiez, an MP from the conservative Les Republicains party, told Le Pen in parliament.

Since Macron called the summer snap election, France's CAC 40 benchmark stock market index has dropped nearly 10 per cent and is the heaviest loser among top EU economies. The euro single currency is down nearly 4 per cent.

The euro showed little immediate reaction versus the dollar, trading for around $1.05 per euro, but dipping against other European currencies, such as the Swiss franc and the pound.

"I’m amazed the euro hasn’t moved much," said Nick Rees, senior foreign exchange market analyst at Monex Europe.

"There are two major powers in Europe, France and Germany, both of which right now are emasculated.”

Barnier's draft budget had sought to cut the fiscal deficit from a projected 6 per cent of national output this year to 5 per cent in 2025.

Voting down his government would be catastrophic for state finances, he said.

Le Pen shrugged off the warning. She said her party would support any eventual emergency law that rolls over the 2024 budget's tax-and-spend provisions into next year to ensure there is stopgap financing.