The French government may be about collapse, after Prime Minister Michel Barnier forced through the first part of his budget without a vote in the National Assembly.
Mr Barnier, the EU’s former chief Brexit negotiator, had to employ Article 49.3 of the French constitution, to get his controversial plan for spending cuts and tax hikes through.
In response to being sidelined by the PM, under the French system lawmakers are able to pursue “censure” – otherwise known as a vote of no confidence – against him.
The 73-year-old could be out of his post within 48 hours, with the radical left New Popular Front effectively teaming up with hard right National Rally, the party of Marine Le Pen and Jordan Bardella, to oust him.
Mr Barnier, a member of the centre-right Republican party, which took a beating during the summer’s Assembly elections, was appointed by Mr Macron to get the French economy out of the mire.
Since Covid, the country’s deficit to GDP ratio has soared. Under EU rules, the deficit cannot exceed 3 three percent of GDP. However, in 2023, France’s ratio spiked to 5.5 percent, and is forecast to be 6.2 percent this year.
Mr Barnier’s brief was to rescue the French economy, getting the GDP to deficit ratio back below three percent. To do that, his budget included deep cuts to public spending totalling £33bn (€40bn), and steep tax rises amounting to £16bn (€20bn).
If Mr Barnier succumbs to a vote of no confidence then his budget plans may fall by the wayside too. Although not necessarily. A caretaker could come in as PM and use constitutional powers to pass the Barnier budget – however this is a legal grey area and could result in political deadlock.
The other possibility is that the budget arrangements from this year could be rolled into next year. However, that would mean France’s economic woes being dragged out, with dire attendant consequences.
France may plunge the Eurozone into a 2015 Greece-style crisis. What’s more, it will create a political headache for the European Commission, who will be faced with sanctioning its second largest economy.
This period of turmoil has already led to a sharp rise in the cost of government borrowing and a rapid sell-off of French stocks.
Paris is now paying 2.9 percent on its 10-year debt, way more than the 2.05 percent paid by Berlin. France’s borrowing costs are now in line with Greece’s.
