President Emmanuel Macron is not merely France’s head of state. He also appears to aspire to be the spokesperson for all of Europe. He has aimed to spearhead Europe’s reaction to the Russia-Ukraine conflict, challenged the U.S. through his support for Palestinian statehood, and commented on former President Donald Trump’s ambition to acquire Greenland. However, detractors argue he ought to concentrate on domestic matters.
In Macron’s France, the nation’s parliament is in significant disarray concerning how to address the substantial debt burden. Furthermore, Prime Minister François Bayrou could face a vote of no confidence as soon as Monday, a vote he is expected to lose. Macron appointed Bayrou last December, after three previous prime ministers stepped down in 2024. To a large extent, the upcoming events present a Déjà vu situation, with the president likely appointing another prime minister, much like he did last December after Michel Barnier resigned.
Towards the end of last month, Bayrou emphasized France’s substantial indebtedness, even though it ranks as the second-largest economy in the , behind Germany. Beyond its significant economic stature, France also serves as a crucial trading partner for the U.S.
Due to the looming fiscal crisis, Bayrou devised a strategy to cut the fiscal deficit to 4.6% of GDP by next year through savings amounting to 44 billion euros ($51 billion) and eliminating two public holidays. This projected deficit would be lower than those recorded in any year from 2020 to 2024.
Nevertheless, the proposed budget-cutting strategy has met with strong disapproval from other factions within the French Parliament, leading to Bayrou facing a vote of no confidence. Organized labor unions are infuriated by the prime minister’s proposals and are threatening to initiate work-stoppage strikes. Leo Barincou, a senior economist at Oxford Economics in Paris, informed Digital that any potential union strikes are not expected to be protracted or to cause significant economic disruption, unlike the Yellow Vest protests of winter 2018-2019.
Should Bayrou be defeated, alternative courses of action are available. “Macron could call a snap election or appoint a new prime minister, but that will be difficult given the current circumstances,” states Elias Haddad, senior markets strategist at Brown Brothers Harriman . “Bayrou is expected to lose, and all other parties have pledged to topple the government.”
One scenario that is highly improbable is a resignation . Barincou suggests: “Most likely, Macron will appoint another prime minister and introduce a minimal budget that won’t be too alarming.” Essentially, while some budget reductions might occur, they would not approach the scale of what the current prime minister put forth in August.
Despite the extreme unlikelihood of a snap election occurring, the populist National Rally (RN) has indicated it is preparing for such an event and is assessing a prospective list of candidates. Jordan Bardella, president of the RN, stated last week, as reported by Reuters: “We can and must be ready for anything, including a return to the ballot box with a dissolution of the National Assembly.”
Bardella delivered his remarks before a meeting organized to ready the RN for upcoming parliamentary elections and conveyed that the party had already selected 85% of its candidates, as reported by Reuters.
The apparent prospect of a French parliamentary collapse has seemingly concerned the European Central Bank, the institution responsible for monetary policy within the single currency area, the eurozone. Already, the yields on French bonds have increased by one-tenth of a percentage point, consequently making borrowing more expensive than in neighboring Germany.
Nevertheless, while this issue isn’t expected to dissipate soon, it is improbable to exert pressure on the wider eurozone, according to Haddad. He also remarks that despite a recent decline in demand for French bonds, there is minimal cause for alarm. “The underlying demand is still good and unlikely to see a destabilizing situation in the financial markets,” he states. “The bonds are relatively healthy.”
According to Ben Habib, who is currently preparing to register Advance U.K., a new right-leaning political party in Britain, a component of France’s overarching challenge is that, from a cultural perspective, the West has deteriorated. He asserts: “The dependency culture has become deeply ingrained in Europe, including the U.K.” Put differently, an excessive number of individuals are depending on government assistance instead of creating income through their own endeavors.
Consequently, this has resulted in economies with slower growth and substantial increases in . This encompasses the U.K., France, Italy, and other nations. Habib comments: “It’s remarkable to me that we haven’t already experienced a collapse.”
Reuters provided input for this report.