In a new political crisis, it seems that the country’s prime minister’s decision, Francois Bairou, has entered the decision of his government the next day, as the three main opposition parties announced that they would not support the proposal.
Already in the early hours of the morning, a massive sell -off of French assets is underway, with CAC 40 in Paris falling over 2% and the yield on the 10 -year French counterpart exceeding 3.5%. The yields of 10 -year bonds in France are now one of the highest in the eurozone, surpassing countries that were once considered at the heart of the debt crisis, such as Greece and Portugal.
According to Eric Nelson, head of G10 FX strategy in Wells Fargo, the prospects for French assets “not particularly positive”, but stressed that
“Part of the issue is that European shares and the euro were a popular momentum trade this year. What we have been seeing in recent days is a slight overthrow of this trend, “he explained.
Regarding the fate of the Bayrou government, Nelson added that “he does not know if Bayrou has already lost. There is still some uncertainty. It has enough to offer to the opposition, ”referring to the possibility of withdrawing a controversial proposal for the abolition of two public holidays.
“They are in a very fine point,” he concluded, “and given the position of investors in European assets, there are many risks.”
Collapse of government on the horizon
Bairo’s fragile minority government is facing serious challenges. The far -right Rassemblement National, left -wing France, and the Greens have already stated that they will vote against, while the Socialists refuse to support the government. If the majority of MPs vote against the proposal, Bairou will be forced to submit the resignation of his government.
It is recalled here that the fragile central alliance that supports the prime minister does not have a majority in Parliament, which makes confidence vote decisive. A similar failure had preceded the previous Prime Minister, Michel Barnier, who had been overthrown after just 90 days.
In the meantime, Bairou said the president has agreed to convene the House of Representatively to present the government’s plan and to conduct the vote of confidence, but the voices of new elections are increasing, especially after the 12 -month period from the previous elections.
IMF’s risk of intervention
The climate deteriorated when French Finance Minister Eric Lobar warned that the government’s collapse could lead to his intervention in the economy. “We are in the middle of the battle,” he told France Inter radio, adding that he is not “frustrated” by the possibility of losing the vote of confidence.
Asked about the comments of other IMF intervention policies, Lobar warned that “this is a danger in front of us. It’s a danger we would like to avoid, but I can’t say it doesn’t exist. “
Debt ‘curse’ and austerity measures
Bairou, trying to reduce the deficit to 5.8% of GDP last year, presented a plan to increase taxes and costs of € 44 billion by 2026. The plan includes the abolition of two national holidays, freezing pensions and social benefits and social benefits.
The prime minister pointed out that the cost of interest would increase from € 60 billion in 2024 to € 66 billion in 2025, making debt burden the country’s most important budget, even over defense and education costs.
“Is there a national emergency situation to deal with our public finances and get out of the debt curse that concerns us all?” Bairou asked rhetorically, stressing the need for political consensus to overcome the contradictions.
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