The political crisis in France could hardly have come at a worse time. The fall of Prime Minister Michel Barnier’s center-right government by Marine Le Pen’s left-wing alliance and right-wing nationalists in parliament on Wednesday evening is leading the heavily indebted country into uncertainty. In the evening, President Emmanuel Macron wants to speak out – that should provide information about what happens next.
An austerity budget for the coming year, which was the reason for the vote of no confidence against the minority government, should have been passed long ago. This is also important in order to secure the trust of the economy and the financial markets, which are currently hesitant to invest in France. The political impasse that had been going on since the summer had caused uncertainty.
France and Germany are weakening at the same time
In addition, in view of the war in Ukraine, the uncertainty before the inauguration of the future US President Donald Trump and the tensions in world trade, what is actually needed is a strong France on the international stage that is not paralyzed by domestic problems and budget issues. The driving force in the EU is also failing with the simultaneous weakness of France and Germany, where a new Bundestag will be elected earlier than planned in February.
“If the motion of no confidence goes through, everything will become more difficult and everything will get worse,” Prime Minister Barnier warned in vain before the vote. The political instability will mean higher risk premiums on loans and additional billions in burdens for the country and France will have to pay even higher interest rates on its debts than Greece. With a public debt level of over 110 percent of its economic output, France is already one of the worst performers in the EU; only Italy and Greece are in an even worse position.
OECD emphasizes importance of budget agreement
In its global economic outlook presented on the day of the no-confidence vote, the industrialized nations organization OECD emphasized the importance of a quick budget agreement in Paris. If the political uncertainty subsides, the markets calm down and the pressure on finances eases. However, if the budget was not passed, the expected economic growth would be at risk and tax revenue would decrease. This, in turn, jeopardizes the government’s ability to reduce the budget deficit.
The fall of the government and the failure of the austerity budget meant further months of political and economic uncertainty for German companies in France, said the chief executive of the Franco-German Chamber of Commerce and Industry, Patrick Brandmaier, to the dpa news agency in Paris. The difficult situation with increasing national debt and the deteriorating economic expectations reinforced this development.
Chamber of Commerce worries about France as a business location
“After more than five years of pro-business and reform-oriented policies, stagnation and uncertainty are now emerging for companies,” said Brandmaier. “Although this does not have any major immediate impact on German companies in France, it does not contribute to the attractiveness and competitiveness of France as a business location.”
“France is in a serious crisis. The vote of no confidence against Prime Minister Barnier increases the instability of the country,” said FDP Bundestag member Sandra Weeser, who is a board member of the Franco-German Parliamentary Assembly. “Weakened confidence in the financial markets will place an additional burden on French taxpayers through rising financing costs.”
As in Germany, the aim in France must also be to get the economy going again through real reforms, said the FDP politician. “German-French cooperation is currently weakened, but we need it more urgently than ever to guarantee European competitiveness and security.”
Will a new prime minister be appointed quickly?
All warnings point to a new prime minister and cabinet being appointed in Paris as quickly as possible. According to French media reports citing the Élysée Palace, Barnier was expected to see the president this morning (10 a.m.) to submit his resignation. Macron could possibly ask him to temporarily remain in office with his government as caretaker. According to media reports, Macron wants to appoint a new head of government very quickly. In the evening, the president wants to address the nation in a speech – will he possibly present a new head of government?
Meanwhile, the populist forces on the left and right fringes in the Paris National Assembly are targeting Macron after the fall of the government. He should resign or at least consider an earlier date for the presidential election, it was said. However, Macron has always emphasized that he will remain in office until the end of his regular term in 2027.
