FRENCH financial markets have fallen amid political uncertainty ahead of yesterday evening's calling of a snap general election.

The election move was seen as necessary to allow the government to push through austerity measures for France to qualify for a single currency, but a period of nervousness in the markets seems in prospect in the run-up to the poll.

The franc and most other EU currencies slipped back against the deutschmark, which benefited from the uncertainty ahead of the election announcement.

President Jacques Chirac's move was seen as a high-risk political gamble.

As the news leaked to the markets, the franc weakened against the German currency, trading at 3.3775 per D-mark, compared to 3.3698 late on Friday. In Dublin the pound closed at 2.6503 Dmarks, compared to 2.6593 on Friday.

French stocks, bonds and interest rate markets all suffered from the climate of political uncertainty, extending last week's losses.

The blue-chip CAC-40 share index closed down 0.98 per cent at 2,522.67. It fell 1.24 per cent at the opening, after closing last Friday down 2.6 per cent.

The benchmark 10-year June French franc bond future fell 0.44 to 128.28. The yield spread - reflecting the risk premium for holding French bonds between the French and the underlying German bond contract narrowed to minus seven basis points from 13 a week earlier.

Markets analysts were last night digesting Mr Chirac's move. "Either it's a masterstroke or it will blow up in his face," strategist Mr Gary Dugan at JP Morgan said.

However, Mr Jim Power, chief economist at Bank of Ireland, said he expected the election to prove favourable in the longer run. It is better to get the election out of the way rather than have uncertainty into next year, he said.