French Government on Brink of Collapse Amidst No-Confidence Vote

By Elizabeth Pineau and Michel Rose, Reuters

The French government is teetering on the edge of collapse after a no-confidence vote brought down Prime Minister Michel Barnier’s administration. The opposition-backed motion, which garnered a majority of 331 votes in support, has plunged France into a deep political crisis that threatens its capacity to legislate and rein in a massive budget deficit.

The Crisis Unfolds

French opposition lawmakers have joined forces to back the no-confidence motion against Barnier and his government. The polarized parliament, which Macron called a snap election in June, has delivered a divided mandate for the new prime minister. With its president diminished, France now risks ending the year without a stable government or a 2025 budget.

France’s political turmoil will further weaken a European Union already reeling from the implosion of Germany’s coalition government. The crisis is also coming at an inopportune time for Macron, as weeks before U.S. President-elect Donald Trump returns to the White House.

The Role of Marine Le Pen

Far-right chief Marine Le Pen had said collapsing the government was “the only way the constitution gives us to protect the French from a dangerous, unfair and punitive budget”. The National Rally party, which had been propping up the minority coalition, each blame the other for the crisis.

No Easy Exit from French Political Crisis

France now faces a period of deep political uncertainty that is already unnerving investors in French sovereign bonds and stocks. Earlier this week, France’s borrowing costs briefly exceeded those of Greece, generally considered far more risky.

Macron must now make a choice. Three sources told Reuters that Macron aimed to install a new prime minister swiftly, with one saying he wanted to name a premier before a ceremony to reopen the Notre-Dame Cathedral on Saturday. US President-elect Donald Trump is due to attend.

Any new prime minister would face the same challenges as Barnier in getting bills, including the 2025 budget, adopted by a divided parliament. There can be no new parliamentary election before July.

A Potential Solution: A Caretaker Government

Macron could alternatively ask Barnier and his ministers to stay on in a caretaker capacity while he takes time to identify a prime minister able to attract sufficient cross-party support to pass legislation. A caretaker government could either propose emergency legislation to roll over the tax-and-spend provisions in the 2024 budget into next year, or invoke special powers to pass the draft 2025 budget by decree.

The danger for Macron is that his opponents vote down one prime minister after the next. His rivals say the only meaningful way to end the protracted political crisis is for him to resign, something he has hitherto shown little inclination to do.

A Concluding Point

France’s political turmoil is a stark reminder of the challenges facing Macron and his government. As the country teeters on the brink of collapse, it remains to be seen whether Macron can navigate this crisis or if France will end up without a stable government for the remainder of 2025.

With its borrowing costs at an all-time high, investors are watching with bated breath as the situation unfolds. The fate of France’s future hangs in the balance, and only time will tell what the outcome will be.

– Reuters