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9:37 30.11.2024 •
Marine Le Pen doubled down on her threat to topple the French government if Prime Minister Michel Barnier resists some of her far-right party’s demands on next year’s budget, which she slammed as “bad, unjust and violent,” writes POLITICO.
Le Pen’s comments came as financial markets took fright that the French budget dispute could precipitate a eurozone-wide crisis, with the yield on France’s benchmark 10-year government bonds coming within a mere one-hundredth of a point of their Greek counterparts. Additionally, the premium investors are demanding over the comparable German bond is now higher than at any time since the depths of the eurozone debt crisis in 2012, at 0.87 percentage points.
Hours earlier, Le Pen’s party, the National Rally, held a press conference to push back against accusations that that a government collapse would lead to a Greek-style financial crisis or to a U.S.-style shutdown.
National Rally heavyweight Jean-Philippe Tanguy accused Barnier of "crying wolf" after he went on national television Tuesday evening to warn of "serious turbulence on the financial markets" that could follow a government collapse.
"Being unable to ensure tax reforms based on justice and fair contributions for all, Mr. Barnier is forced to brandish panic [and] the fear of chaos," Tanguy retorted.
Tanguy said that were the government to collapse, it will still be able to introduce stopgap measures to ensure that the administration keeps functioning.
"We commit to vote in favor of that law," Tanguy promised.
Barnier and the National Rally are at odds over the conservative grandee's budget plans for 2025, which includes €60 billion in savings aimed at reducing the French deficit. The deficit is projected to come in at 6.1 percent of gross domestic product for 2024, more than double the European Union limit for overspending.
Since his appointment in early September, Barnier has made clear that bringing down the deficit would be his key priority — a promise that has calmed those in Brussels worried about France's overspending since the pandemic. The European Commission on Tuesday endorsed Barnier's plan to get France's finances in order.
Lawmakers have been debating Barnier's budget for weeks, but with the end of the year nearing it has become increasingly clear that the prime minister will need to use a constitutional backdoor to pass it. The maneuver allows him to enact legislation without a vote — but in turn allows lawmakers to put forward motions of no confidence. An alliance of pan-left lawmakers has already announced to bring one forward.
The National Rally has, until recently offered tacit support to Barnier's minority government, which is backed by a conservatives and centrists in a messy marriage of convenience. Le Pen threatened to join the left's effort to oust him over several demands related to the budget — including scrapping an electricity tax hike and a proposal delay to the inflation adjustment for pensions.
France is barreling toward a perfect storm of political and financial crisis as 2024 comes to a close, writes POLITICO.
Marine Le Pen’s far-right National Rally is threatening to pull the plug on the fragile coalition government led by Prime Minister Michel Barnier over the conservative grandee's plans to rein in the massive French deficit.
In a dramatic move, Le Pen gave Barnier until Monday, the 2th December, to answer her demands and amend his government's budget plans.
Should the government fall, which could happen as soon as next week, it could carry catastrophic ramifications for French finances and the stability of the eurozone.
Let’s rewind back to June, when French President Emmanuel Macron called a snap election after the far-right National Rally handed his party a major defeat in the European election. The French vote saw the New Popular Front, a coalition of left-wing parties that came together to block the National Rally, win the most seats in the French parliament but fall short of an absolute majority. Macron's centrists lost their majority and finished second, while the National Rally came in third.
The result was a hung parliament.
The New Popular Front believed that because it won the election, it had the right to form a government. Macron disagreed, arguing that without an absolute majority, a leftist government could easily be toppled by their political adversaries.
After weeks of speculation and talks, Macron tapped Michel Barnier, the former Brexit negotiator for the European Union, as premier in early September. Barnier then cobbled together a government with the backing of Macron's centrists and a small band of conservatives, who together hold more seats than the New Popular Front but are still short of an absolute majority.
By tapping a conservative premier who pushed the government further to the right, Macron tied Barnier's future to the whims of Le Pen and the National Rally. The president and premier banked on the fact that the National Rally, which has spent years trying to sell itself as a respectable, mainstream political force, wouldn't immediately take down a rightward-leaning government that was amenable to some of their ideas on immigration and security.
So the National Rally offered Barnier tacit support, while reserving the right to pull the plug on it should he fall afoul of their red lines relating to purchasing power, security and immigration.
Why now?
Barnier made it clear from day one that his priority was to bring down the French budget deficit, the difference between the amount a country spends and the amount it brings in.
France spent massively to keep the economy afloat during and after the pandemic, which caused the deficit to spike to 5.5 percent of gross domestic product in 2023, prompting the European Commission to place France under what its calls an "excessive deficit procedure" — closer scrutiny that can culminate in sanctions if targets aren't met.
Both must be adopted by the end of the year, so as the deadline has gotten closer, the issue has come to the fore. After meeting with Barnier on Monday, Le Pen said she and her troops were planning to oust the government "as things stand."
Barnier is likely going to have to use a constitutional backdoor to pass his budget, Article 49.3 of the French Constitution. The measure allows the government to enact legislation without a vote in the National Assembly. However, lawmakers are allowed to respond by putting forward a motion of no confidence.
Members of the New Popular Front, still furious over Macron's decision to spurn their chances at governing, have already vowed to do so.
What happens if the government falls?
It's not exactly clear. In the immediate term, the budget won't be approved.
Don’t expect a U.S.-style shutdown that would paralyze the country’s administration, though, as the French constitution provides for at least two stopgap solutions. The first allows the government to put forward a so-called “special law” allowing the state to effectively carry over the previous year's budget for a few months.
The second option is more complicated, but would see the parliamentary debate continue until Dec. 21 and then allow the government to adopt the budget via a government order. Barnier would still expose himself to a no-confidence vote, which he'd most likely lose, but the budget would be adopted.
There's also the political uncertainty to worry about. Barnier's government would continue to serve in a caretaker capacity, but Macron would at some point need to name a new prime minister to try to steer legislation through the divided National Assembly.
Why is Brussels so scared?
There are also bigger concerns about the stability of the Eurozone.
Remember, similar issues in Greece and Portugal prompted Europe-wide scares last decade. Just imagine what could happen if Europe's second-biggest economy found itself in the same mess.
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