Baabda: Lebanon's Prime Minister-designate Mustapha Adib gestures after saying that he is stepping down at the presidential palace on Saturday.
Macron said none of the leaders of Lebanon - where in the wake of the 1975-1990 civil war power is traditionally shared between Shiites, Sunnis and Christians - had been up to the task.
Adib's announcement deals a blow to French President Emmanuel Macron's efforts to break the stalemate in the crisis-hit country.
Former premier Saad Hariri - who himself quit last autumn, during massive protests - was among several former premiers who on Saturday lamented the deadlock that led to Adib's resignation.
With the resignation of Adib, the Macron initiative to raise funds for the assistance and rehabilitation of the country may now come to a close.
"People are concerned - they know that if there is no "credible government", or a government that is seen to be legitimate in the eyes of the global community, that money will not be pouring into the country", Khodr said.
Analyst Karim Bitar said Lebanon was expected to have a rough patch ahead.
Adib announced his decision to step down following a meeting with President Michel Aoun on Saturday.
Earlier this week, Lebanese President Michel Aoun warned the country was headed to "hell" unless all political parties stepped up and facilitated the formation of a government. He wished his successor well in the "hard task" of forming a government.
"He has not ruled out the option of using French sanctions against some political leaders if they can be linked directly to corruption though", Butler said.
"Even if Lebanon is not hell-bound, we will probably witness. the weakening of public institutions, a worsening of the economic crisis. and a wave of emigration", he said.
A French roadmap laid out a reform program for a new government to help trigger billions of dollars of global aid.
As Mr Adib pushed for control of the key ministries to be rotated among the country's main sects - namely, Sunnis, Shias and Maronites - the Shi'ite duo Hizbollah and its ally the Amal Movement held firm on their grasp of the finance ministry.
The French leader has described his initiative, which includes a road map and a timetable for reforms, as "the last chance for this system".
Amal leader and Parliament speaker Nabih Berri said his group still backed the French plan, while Suleiman Frangieh - head of a Christian group allied to Hezbollah - called the initiative a "golden opportunity that Lebanon must not lose".
"Regrettably, notwithstanding the financial crisis and the port explosion, it remains business as usual in Beirut", the spokesperson added.
But during weeks of consultations, Adib repeatedly failed to present a Cabinet lineup, despite having initially received the backing of the country's political parties.
Opponents accused Mr Adib of not consulting enough.
The street value of the Lebanese pound, which has plunged from an official peg of 1,500 to the dollar since the economic crisis erupted a year ago, weakened further after the news.