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French Prime Minister Michel Barnier delivers a speech during a debate ahead of a vote of no confidence in his administration at the National Assembly in Paris, France on December 4, 2024.
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The ouster of French Prime Minister Michel Barnier’s government on Wednesday could be seen as the culmination of months of political upheaval in France, with left and far-right opposition parties forming an unlikely alliance to oust the government in a no-confidence vote.
However, rather than marking the end of Paris’ troubles, the end of Barnier’s short-lived prime ministership and government ushers in a new period of political turmoil and uncertainty in Paris, analysts and economists say.
Barnier resigned on Thursday morning, hours after last night’s vote by 331 lawmakers from the leftist New Popular Front (NFP) alliance and the far-right National Rally (RN). support a motion of no confidence in his government.
The vote, which came after weeks of wrangling over the 2025 budget’s plans to raise taxes and cut public spending, was not a close call as the number of MPs supporting the motion far exceeded the 288 needed to pass the proposal in parliament, the National Assembly. . It was the first time a French government had been overthrown since 1962.
National Rally President Marine Le Pen, right, during a no-confidence debate at the National Assembly in Paris, France, Wednesday, Dec. 4, 2024. Due to the collapse of the government, the outgoing administration starts acting as an interim administration to manage the current one. cases and avoid exclusion.
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Barnier’s ouster was the culmination of a political crisis that began when President Emmanuel Macron decided to call early parliamentary elections earlier this year. ironically in an effort to consolidate the power base of his centrist alliance in the National Assembly.
The move ultimately backfired, and Macron got exactly what he didn’t want from the June and July elections: a severely reduced power base for his own Ensemble centrists and a National Assembly split into three with a highly empowered left wing and far-right factions that are ready to sacrifice Barnier, the prime minister Macron finally chose in September.
President Macron is now under pressure to quickly find a replacement as prime minister Reuters reports Thursday that he would like to have someone in place as early as Saturday, when US President-elect Donald Trump and other dignitaries gather in Paris to reopen Notre Dame.
The next candidate is likely to face the same problems that Barnier faced with the left and the right, who are expected to drive the new government crazy with their 2025 budget programs as they did with Barnier.
“France is entering a new era of political instability,” senior Franco-Swiss economist Charlotte de Montpellier said Wednesday night.
“President Emmanuel Macron will have to appoint a new prime minister who will have to form a new government. As the National Assembly is highly polarized and divided into three main camps – the left, the center right and the far right – finding a new prime minister who will not directly face a vote of no confidence will be a very difficult mission , she said.
“It is therefore possible that France will be without a government for several weeks, if not months,” she added.
Who could be the next prime minister?
There is speculation that Macron could nominate his ally, Defense Minister Sébastien Lecorne, or veteran centrist leader François Bairou, president of the French party Mouvement Démocrate, for the post. Other names mentioned as possible candidates include Interior Minister Bruno Retailleau and former Prime Minister Bernard Cazeneuve.
According to Eurasia Group managing director for Europe Mujtab Rahman, whoever inherits the job won’t be able to last long, nor can they be expected to.
“His (no ‘her’s” included) first job will be to pass the 2024 budget. His second will be to try to revive Barnier’s deficit-reducing 2025 budget with amendments that could appeal – an arguably impossible task – to the left or the far right or both, Rahman said on Wednesday night.
A portrait of French Prime Minister Michel Barnier standing among members of his government to applause from his ministers and MPs.
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Analysts expect Macron to choose Barnier’s successor within days, but note that the candidate’s premiership could effectively be a stopgap until new parliamentary elections next July, a year after the last vote.
“France’s deepest and most tangled political crisis in six decades will stumble throughout the next year,” Rahman said, warning that “the confrontation between three mutually hateful forces in the National Assembly will continue for many months with no immediate prospect of agreement on a new budget for 2025.”
Eurasia Group’s new baseline scenario was that new parliamentary elections next year are inevitable, predicting a 75% chance.
As it stands, analysts believe it is likely that France’s major political blocs will agree on a provisional budget that will simply carry over the 2024 budget to next year. This will prevent any government “shutdown” in the new year, when France will no longer be able to meet its financial obligations.
Extending the budget could avert an immediate crisis, but it also delays the urgent need to address France’s fiscal problems, with the budget deficit already projected to reach 6.1% of GDP in 2024 and expected to rise further if no action is taken , to limit it. in spending.
For now, the markets are calm
Investors seem to have accepted the fall of the French government as a “fait accompli”. French government 10-year benchmark bond yield relatively steady around 2.9% on Thursday — a far cry from a week ago when France’s borrowing costs reached the same level as debt-laden Greece — and CAC 40 in positive territory at noon Thursday.
Chris Beauchamp, chief market analyst at IG Markets, commented on Thursday that markets may not remain calm for long, especially if opposition calls for President Macron to step down and call early presidential elections come true, although this is considered an unlikely scenario.
“A new interim leader will be appointed soon, but there seems to be no way out of the budget impasse. Markets are calm for now, but if the far left and right succeed in eventually ousting Macron as president, we can expect further turmoil in French yields, the CAC40 and the euro, he said in emailed comments.
A cafe bar near the Eiffel Tower on the last day before new Covid-19 restrictions force the capital’s bars and cafes to close for at least two weeks on October 5, 2020 in Paris, France.
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ING’s De Montpellier pointed out that the very likely extension of the 2024 budget to 2025 means a fiscal policy that is less restrictive than planned in terms of tax revenues and in line with the plan in terms of public spending.
“This means that the Barnier government’s promised goal of returning to a deficit of around 5% of GDP in 2025 is unattainable. The national budget deficit will remain high, probably around 5.5% of GDP, the debt will continue to grow, and the next government – whatever it is, there will be an even more difficult task in restoring the state’s finances,” she warned.
“Furthermore, the fall of the government means that political uncertainty will remain and will continue to hurt business and consumer confidence, although fiscal policy could be slightly less restrictive.”
ING predicted that the French economy would grow by 0.6% in 2025, compared to 1.1% in 2024. It said a downward revision cannot be ruled out if volatility persists, especially if bond yields continue to rise due to the current political bias. “.
