It is not just the future of a prime minister who is concerned. It is the finances and confidence of markets in the ability to honor commitments. And, above all, the quality of life of those who live there. France has a government about to fall. Does the rest go through drag?
There are Mondays that cost more than others. And this Monday, to France, promises to become a real headache. It is that if the situation was already periclicing, everything can be precipitated for a new political crisis with the vote of confidence facing Prime Minister François Bayrou.
He was asked by himself to validate an austerity plan that does not seem to please anyone in France. At issue are 44 billion euros cuts, which imply a freezing on social support or a new “solidarity contribution” to the richest.
And in what is one of the measures that is most generating controversy, the cut of two holidays: Easter Monday and May 8, in which victory was celebrated in World War II.
In France, an “Italian style” setting
“Everyone should contribute to the effort” to restore public finances, Bayrou appealed. And why is the prime minister advanced with this plan in a long-divided France? Because the country’s accounts have not been doing well too.
Now see: the debt is in the 114% of GDP, the third highest in the eurozone after the Greek and the Italian. Simply put, France spends more than it can produce.
Then the deficit continues to grow: by 2024 it was 5.8% of GDP, far above what dictate the European rules, which have the 3% as a reference. With Bayrou’s plan, the goal was that this indicator would be for 4.6% next year.
This forces France to finance itself, that is, to borrow money. And you have to pay higher interest rates to do so. Financial notation agencies such as Fitch, S&P and Moody’s have shown their concern about France’s ability to honor their commitments. If the evaluation falls, the costs to finance themselves go up – with impact, of course, on French taxpayers.
The markets are nervous. But can we say that France is on the edge of bankruptcy, as happened in Portugal, forcing the Troika entry? To CNN Portugal, from Paris, Léo Barincou, senior economist at Oxford Economics guarantees no.
“No, France is far from being in a similar situation. A debt crisis is very unlikely in the short term. France continues to finance itself without difficulty in markets. Although the spread is higher than before, it is still in absolute terms. And the European Central Bank, as a last resort, would provide financial support to France in the event of major tensions in the obligationist markets,” he argues.
“In addition, the effective rate France pays on the stock of its debt continues to be relatively low from a historical perspective. Even if they are gradually felt higher, as France renews its debt. It is more likely a ‘Italian style’ scenario: without major crises or external interventions, but with debt to be an increasingly suffocating burden,” he adds.
It was the Prime Minister himself who asked for the vote of confidence (Christophe Petit Tesson/EPA)
Cuts in all directions
It has long existed in France the feeling that they are always the same to pay the crisis. On social networks, young people now criticize older generations because they are having to hold the burden. Protests are summoned to the streets: the activist movement ‘Bloquions Tout’, which literally means ‘let’s block everything’-from supermarkets to roads-has street actions for this Wednesday.
There is division in the people and also in whom it represents it in the National Assembly. Without absolute majority, the government has sought to survive with punctual agreements. Difficult task in a polarized hemiciclo between the far right of the National Union of Jordan Bardella and the extreme left of the unsubmissive France of Jean-Luc Mélenchon.
The most likely this Monday is that Bayrou does not see approved the vote of confidence and his government fall-even because most parties have already indicated that they will vote against. What follows later, taking political instability, is unknown. French President Emmanuel Macron can appoint another prime minister or call elections-it is to this last scenario that he has appealed to the far right, who believes he can improve his results in the face of the last suffrage, something the French president will want to avoid at all costs.
Several international analyzes point out that Macron is most expected to name another Prime Minister to the Center, leaving France more or less in the same state of affairs and without an effective plan that allows him to improve his accounts and the confidence that markets deposit in the country-the main goal will be to pass the 2026 budget, with a less ambitious deficit than Bayrou.
In the most unlikely scenario, of Bayrou seeing the vote of confidence approved, certain would be the punctual cedences, such as the issue of holidays. There were already demonstrations of availability in this regard and several meetings with the other parties. The government is on a thread. But if this wire is not ripped now, austerity will be a reality that will eventually undo it.
Change to get everything the same
“The fall of the Bayrou government and the failure of the planned budget consolidation is not a big surprise, given the absence of a majority in the National Assembly. We remain, in the same state of uncertainty and instability that began with the June 2024 elections. The fall of Barnier governments last year, and this year do not change the situation. Position in which budgetary consolidation is necessary, but in which the political context does not allow a significant adjustment of public finances, ”summarizes CNN Portugal Léo Barincou, senior economist at Oxford Economics.
The polls have been clear: most French want parliament to be dissolved, there are new elections and the resignation of President Macron. Most, above 80%, are against the elimination of two holidays and believes that the plan presented will impair their purchasing power.
Bayrou’s plan predicts that they are frozen, at the 2025 values, the social support of next year. This is added to cuts in the national health system above five billion euros, which will make the French contribute more through the copagoses. There will be cuts in public expense, except for debt services and defense: It is recalled that Macron defended the need to reinforce this last budget at 3.5 billion euros next year.
Macron has insisted on the need for cuts, except in defense (Abdul Saboor/Reuters)
Final lesson
And from the French situation, Portugal – and the remaining European Union – could you learn anything? “I believe it would be France who would have the most to learn from the debt consolidation episodes in Portugal and other European countries. In a more comprehensive way, the lesson that France offers us today is that political instability and the absence of a clear majority is a much more serious problem in a country that needs to regularize its public finances than in a country where the fiscal situation is solid,” Léo Barcon from Oxford Economics.
