French Prime Minister Michel Barnier has resigned following the result of the first no-confidence vote against the French government presented by the coalition of left-wing parties “Nouveau Front Populaire” (New Popular Front – NFP). Special Clause 49.3 of the French Constitution is used by the French government to push a budget bill through the National Assembly without a vote of lawmakers in the National Assembly of Parliament Paris, France, Dec. 4, 2024.
Sarah Maisonnier | Reuters
The fall of French Prime Minister Michel Barnier’s government on Wednesday could be seen as the culmination of months of political turmoil in France, with left and right-wing parties forming an unlikely alliance to oust the government in a no-confidence vote.
However, rather than marking the end of Paris’ problems, analysts and economists say the end of Barnier’s short-lived premiership and government will usher in a new period of political turmoil and uncertainty in Paris.
Barnier resigned on Thursday morning after hours of voting yesterday evening that saw 331 lawmakers from the left-wing New Popular Front (NFP) alliance and the right-wing National Rally (RN) win. Support a motion of no confidence against his government.
The vote was not a close call after weeks of wrangling over plans to raise taxes and cut public spending for the 2025 budget, which fell short of the 288 necessary for passage in parliament. . This is the first time a French government has been overthrown since 1962.
President Marine Le Pen of the National Rally for the Right deals and avoid a deadlock during a no-confidence motion debate at the National Assembly in Paris, France, Wednesday, Dec. 4, 2024.
Bloomberg | Bloomberg | Getty Images
Barnier’s ouster is the culmination of a political crisis that began when President Emmanuel Macron decided to call snap parliamentary elections earlier this year. Ironically, in an attempt to increase the power base of his centrist alliance in the National Assembly.
In the end, the move backfired and Macron got exactly what he didn’t want from the elections in June and July: a heavily-reduced power base for his own Ensemble centrists and a National Assembly with three-way over-powered left and right blocs poised to poach Prime Minister Barnier, whom Macron ultimately chose in September. .
President Macron is now under pressure to quickly find a replacement prime minister Reuters reports U.S. President-elect Donald Trump and other dignitaries gathered in Paris for the reopening of Notre Dame Cathedral on Thursday, he said Thursday, wanting to have someone over.
The next candidate will face the same problems Barnier did with the left and right expected to harass the new government with their own agendas for the 2025 budget as they did with Barnier.
“France … is entering a new era of political instability,” Charlotte de Montpellier, senior economist for France and Switzerland at ING, said in a note late Wednesday.
“President Emmanuel Macron will have to appoint a new prime minister, who will have to form a new government. The National Assembly is highly polarized and divided into three main camps – left, centre-right and far-right – making finding a new prime minister who will not directly face a no-confidence motion a very difficult mission.” He said.
“Therefore France is likely to remain without a government for several weeks, if not months,” he said.
Who will be the next prime minister?
There is speculation that Macron could nominate his ally, Defense Minister Sébastien Lecornu, or veteran centrist leader François Bairro, president of the French member party Movement Democrats. Other names mentioned as possible candidates include Interior Minister Bruno Retaileau and former Prime Minister Bernard Cazeneuve.
According to Mujtaba Rahman, managing director for Europe at Eurasia Group, whoever inherits the job will not stay in the role for long, nor be expected to do so.
“His (no “her” in the frame) first job is to push through the 2024 budget rollover. His second is to try to revive Barnier’s deficit-reduction 2025 budget with amendments — an arguably impossible task for either the left or the right or both,” Rahman said in a note late Wednesday.
A portrait of French Prime Minister Michel Barnier standing among members of his government, applauded by his ministers and Macronist MPs.
Amaury Cornu | Afp | Getty Images
Analysts predict that Macron will choose a successor to Barnier within days but note that the candidate’s premiership could effectively be on hold until elections for a new parliament next July, a year after the last vote.
“France’s deepest and most chaotic political crisis in six decades will flounder throughout next year,” Rahman said, adding that “the showdown between three, mutually hostile powers in the National Assembly will continue for months with no initial prospect of an agreement on a new budget for 2025.”
The Eurasia Group’s new base-case scenario is that new parliamentary elections are inevitable next year, putting the probability at 75%.
As it stands, analysts think France’s main political factions are likely to agree on a provisional budget, which would roll over the 2024 budget to next year. This would prevent any New Year government “suspension” where France cannot meet its fiscal obligations.
Rolling the budget could prevent an immediate crisis but it would delay the urgent need to tackle France’s fiscal problems, with the budget deficit already predicted to hit 6.1% of GDP in 2024 and expected to rise further if steps are not taken to contain it. at cost.
Markets are quiet for now
Investors have hailed the fall of the French government as a ‘convenience’. The yield on France’s benchmark 10-year government bond Relatively steady at about 2.9% Thursday — a far cry from a week ago While France’s borrowing costs hit the same level as debt-laden Greece – And CAC 40 Thursday afternoon in positive territory.
Chris Beauchamp, chief market analyst at IG Markets, commented on Thursday that markets will not be calm for long, especially if opposition calls for President Macron to resign and call an early presidential election materialize, although this appears to be an unlikely scenario.
“A new caretaker will be appointed soon, but there seems to be no way out of the budget crisis. Markets will remain calm for now, but if the left and right finally succeed in ousting Macron as president, we can expect a new round of tremors. 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 bars and cafes in the capital to close for at least two weeks on October 05, 2020 in Paris, France.
Kieran Ridley | Getty Images News | Getty Images
ING’s de Montpellier noted that the extension of the 2024 budget implies a fiscal policy for 2025 that is less restrictive than planned in terms of tax revenue and less restrictive than planned in terms of public spending.
“This means that the objective of returning to a deficit of around 5% of GDP in 2025, as promised by the Barnier government, has not been reached. The public deficit will remain high, perhaps around 5.5% of GDP, debt will continue to grow and the next government – whoever it may be – will have an even more difficult task to get public finances back on track,” He warned.
“Furthermore, the fall of the government means political uncertainty will continue and weigh on business and consumer confidence, even if fiscal policy is slightly less restrictive.”
ING expects France’s economy to grow by 0.6% in 2025, compared to 1.1% in 2024. A downward revision cannot be ruled out if volatility continues, especially given the current political imbroglio as bond yields rise further, it noted. .”
