Everything You Need to Know About the French Political Crisis
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Loading... - Adelino Langa
- 02 Dec 2024
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France is currently facing a potential political and financial crisis as it approaches the end of 2024. The fragile coalition government led by Prime Minister Michel Barnier is at risk of collapse, primarily due to tensions with Marine Le Pen and her far-right National Rally party. This situation could have significant ramifications for French finances and the stability of the eurozone.
The political turmoil began in June 2024, following a snap election called by President Emmanuel Macron after a significant defeat for his party in the European elections. The results led to a hung parliament:
- The New Popular Front, a coalition of left-wing parties, won the most seats but lacked an absolute majority.
- Macron's centrists lost their majority, finishing second, while the National Rally came in third.
Macron opposed the left forming a government, fearing it could undermine his legacy, particularly regarding reforms like raising the retirement age. In September, he appointed Barnier, the former EU Brexit negotiator, as Prime Minister to lead a coalition government.
Barnier's government, backed by Macron's centrists and a small group of conservatives, is still short of an absolute majority, making it vulnerable to the National Rally's influence.
Barnier's government has prioritized reducing the French budget deficit, which ballooned to 5.5% of GDP in 2023 due to pandemic-related spending. The European Commission has placed France under an "excessive deficit procedure," which requires eurozone members to keep their deficits below 3% of GDP.
With the 2024 deficit projected at 6.1%, Barnier proposed a budget that includes €40 billion in cuts and €20 billion in tax hikes aimed at reducing the deficit to 5% of GDP. However, these proposals have been unpopular domestically and have sparked heated debates in parliament.
Le Pen has threatened to withdraw support for Barnier's government unless her demands regarding purchasing power, security, and immigration are met, giving Barnier a tight deadline to respond.
To pass his budget, Barnier may need to invoke Article 49.3 of the French Constitution, allowing him to enact legislation without a vote in the National Assembly. However, this could trigger a motion of no confidence from lawmakers, particularly from the New Popular Front, who are still resentful of being sidelined.
If Le Pen’s National Rally supports the motion, it could pass, leading to the collapse of Barnier’s government. This scenario poses risks for Le Pen as well, as it could damage her party's image, which she has worked hard to rehabilitate.
If Barnier's government collapses:
- The immediate consequence would be the failure to approve the budget.
- France would not experience a U.S.-style government shutdown, as the French Constitution allows for temporary measures to carry over the previous year's budget.
- However, political uncertainty would ensue, and Macron would need to appoint a new Prime Minister to navigate the divided National Assembly.
Brussels is particularly concerned about the situation. Barnier was seen as a key figure to help restore fiscal discipline in France, and a government collapse could lead to increased debt and deficit levels, threatening the stability of the eurozone. Historical precedents from Greece and Portugal serve as reminders of the potential fallout from such financial crises.
The political landscape in France is precarious as Barnier's government faces significant challenges from the National Rally and internal divisions. As the government navigates budgetary pressures and political maneuvering, the implications of a potential collapse extend beyond France, raising concerns about the stability of the eurozone as a whole. The coming weeks will be crucial in determining the future of the French government and its financial health.
