By Benoit Van Overstraten and Diana Mandia
PARIS (Reuters) – French lawmakers are all but certain to dismiss the government on Wednesday in a vote of no confidence, plunging the euro zone’s second-largest economy into deeper political turmoil.
Barring last-minute surprises, Prime Minister Michel Barnier’s government will face France’s first forced no-confidence vote in more than 60 years as the country struggles to rein in a huge budget deficit.
That would leave a hole at the heart of the European Union at a time when Germany is also weakened and in election mode, weeks before US President-elect Donald Trump re-enters the White House.
In a television interview on Tuesday, Barnier said he still believed his government would be able to survive the vote scheduled for the evening after the debate, which starts at 4pm (3pm GMT).
But far-right National Union (RN) leader Jordan Bardella confirmed on Wednesday that his party would vote to oust Barnier alongside left-wing parties.
He said Barnier’s optimism showed the government was “totally out of touch with what’s going on in the country”.
“This government is dangerous for my country,” he told France Inter radio. “We will vote for a vote of no confidence.”
Interior Minister Barnier Bruno Reteillo was devastated.
“Nothing is finished before the vote, but we can see that we are getting closer to condemning (the government),” he told CNews.
President Emmanuel Macron, who won a second mandate in 2022, precipitated the crisis by calling early parliamentary elections in June.
His term as president runs until mid-2027 and he cannot be removed from office by parliament, but the RN and the hard left are already saying he must step down as he faces the biggest crisis since the Yellow People’s Unrest (OTC:) vest 2018-2019.
Since Macron announced the election, 40 has fallen by almost 10% and is the biggest loser among the EU’s leading economies. The single currency fell by almost 4%.
VOTE OF NO CONFIDENCE PUTS BUDGET DEFICIT REDUCTION AT RISK
Political uncertainty is already weighing on France’s services sector, a monthly survey showed.
“The positive signals … that were seen in the summer, partly due to the Olympics, are now a thing of the past,” said Hamburg Commerzbank economist Tariq Kamal Chaudhry after reviewing the HCOB purchasing managers’ index for France’s services sector.
Barnier’s draft budget sought to reduce the budget deficit, which is forecast to exceed 6% of national output this year, with tax increases and spending cuts of 60 billion euros ($63 billion). He aimed to reduce the deficit to 5% next year.
The caretaker government could propose emergency legislation to override the spending caps and tax provisions from this year. But it will mean that Barnier’s austerity measures will take a back seat.
Barnier says the consequences of a vote for him would be catastrophic for public finances, but RN lawmaker Laure Lavallette told TF1: “There is no reason for this to lead to a great deal of chaos. Don’t play with your fears … not everything is going to fall apart.”
Bond investors are likely to spare France the dire financial “storm” Barnier warned of, but the fallout from the political crisis will hurt businesses, consumers and taxpayers, economists and experts say.
“This is a slow-moving crisis that will lead to a permanent widening of spreads and a permanent deterioration of sovereign creditworthiness,” said Christian Kopf, head of fixed income and currencies at Union Investment, which is underweight French debt.
“But at this point, I don’t see the ingredients for this to get completely out of control and turn into an open sovereign debt crisis.”
If the vote of no confidence passes, Macron could well ask Barnier to stay on as acting prime minister, as the search for a new prime minister could take until next year.
