LONDON, Aug 26 (Reuters) -

French stocks tumbled, particularly banks, and the country's

bonds tumbled on Tuesday as France's minority government looked

increasingly likely to be ousted next month.

Three main opposition parties said they would not back a

confidence vote which Prime Minister Francois Bayrou announced

for September 8 over his plans for sweeping budget cuts.

France's blue chip CAC40 index was last down nearly 2%

having fallen 1.6% late on Monday, with banking giants

BNP Paribas and Soociete Generale each down

more than 6%.

France's 10-year government bond yield rose around 4 basis

points to around 3.53%, its highest since March.

When a bond's yield rises, its price falls.

The gap between French and German 10-year yields, a gauge of

the premium investors require to hold French debt, meanwhile

widened to around 79 bps -- its largest since April.

Analysts had anticipated a return in French political risk

in the autumn as the government tries to secure support for

steps to improve France's fiscal position. But Monday's

developments came as a surprise.

If Bayrou loses the confidence vote in the National

Assembly, his government will fall. President Emmanuel Macron

could then name a new prime minister, ask Bayrou to stay on as

head of a caretaker government, or he could call a snap

election.

"We see increased volatility and pressure on French (bond)

spreads in the coming days," said Mohit Kumar chief European

economist at Jefferies in a morning note.

The gap between French and Italian 10 year yields, which was

around 150 bps two years ago, is now just 9 bps.

But French Finance Minister Eric Lombard said on Tuesday he

was "certainly not resigned" to the idea of Prime Minister

Francois Bayrou's minority government falling next month.

Lombard also suggested there was a risk the IMF would have

to intervene in the economy if the government falls.

"We are right in the thick of the battle," Lombard told

France Inter radio.