France remains plunged into political crisis

Photo: Julien de Rosa Agence France-Presse Formed on September 21, Michel Barnier's government is fragile.

Agence France-Presse in Paris

Published and updated on November 27

• Europe

The far right is more than ever threatening to censure the minority centre-right government in France, perhaps as early as next week, over the social security budget, despite warnings of a risk of “weakening” the country.

Formed on September 21 following the unexpected dissolution of the National Assembly by President Emmanuel Macron in June, Michel Barnier's government is fragile.

France is heavily in debt and the government wants to vote on many highly criticized economies. The government coalition is also divided on tax increases.

The left and the far right could thus bring it down together.

Without waiting for the final reading of the State budget in mid-December, a motion of censure could be filed as early as next week in the event of recourse to Article 49.3 of the Constitution — which allows a text to be passed without a vote by engaging the government’s responsibility — on the Social Security budget.

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Senators and deputies, in a joint committee, agreed on Wednesday on a compromise concerning this budget, which notably provides for a reduction in employer contribution reductions. The text will be sent back to the two chambers, and very probably submitted to the Assembly under Article 49.3.

According to the leader of the far right, Marine Le Pen, the prime minister did not meet the expectations of the French with “clear and firm commitments” — on the abandonment of the reimbursement of new drugs, for example — during his televised speech on Monday.

France “in the wall” ?

His party’s deputy Jean-Philippe Tanguy also did not see “a hand extended” by Michel Barnier the day before, even though the latter said he was ready to do more to “preserve purchasing power” and announced a mission on proportional representation during the elections, another demand of the National Rally (RN).

According to the government spokesperson, the left and the far right, by bringing down the government, “ would take the risk of sending the country into a wall” and should “assume responsibility for a lasting weakening” of France on an international scale.

“We have the choice today between raising our heads [and] accepting a recovery budget […] or sinking into a deficit that will lead us towards a lasting economic, social and diplomatic weakening of the country,” declared government spokesperson Maud Bregeon.

The French are divided on censorship, with a slight majority in favour (52% against 48%), but the trend reverses when they are asked about the risk of a financial crisis, according to an Elabe poll published Wednesday for the BFMTV channel.

Stock market down

Prime Minister Barnier warned on Tuesday of “serious turbulence on the financial markets” if his government falls, while France is borrowing at rates that are “already very high” ».

The gap between French and German borrowing rates on the markets reached its highest level since 2012 on Tuesday. And on Wednesday, France’s borrowing rate briefly exceeded that of Greece on the markets, an unprecedented situation that reflects investors’ fears about the French political situation.

“France has room to maneuver, of course, but the symbol is there,” Aurélien Buffault, bond manager at Delubac AM, told AFP.

However, “France has one of the best-managed debts in the world and is considered very liquid, which means that it can be bought and sold very quickly, a very positive factor,” he noted.

The Paris Stock Exchange ended down 0.18% on Wednesday, with the political crisis pushing investors to shun blue-white-red assets. On Tuesday, it had already lost 0.87%.

With a public deficit in sharp decline, expected this year at 6.2% of gross domestic product, very far from the 3% ceiling authorized by EU rules, France is posting the worst performance of the 27 countries of the European Union with the exception of Romania.

Since the summer, Europe's second-largest economy has been part of a group of eight countries in excessive deficit procedure.