Macron’s options all spell trouble for French debt
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Pierre Briancon
BERLIN, Dec 3 (Reuters Breakingviews) -President Emmanuel Macron has three options to respond to the probable fall of the French government later this week: the bad, the worse and the ugly. All will lead to deteriorating public finances. France is headed for months of political chaos, with a serious economic cost, even if it doesn’t trigger a debilitating market crisis.
Prime Minister Michel Barnier’s administration is doomed after just three months in office, because of his failure to pass the 2025 budget through parliament. Right-wing and left-wing parties have submitted no-confidence motions for a vote scheduled for Wednesday. Together, they have the numbers to sink Barnier, who has been governing without a majority since Macron’s June snap election led to a hung parliament. Governing under such conditions would have been a challenge even in good times. But Barnier had the added headache of coming into office with a budget deficit out of control and projected to top 6% of GDP this year.
Macron’s first option, the bad one, would be to appoint a prime minister in the Barnier mould – a temperate centrist who could seek compromise with Rassemblement National, the far-right party whose leader Marine Le Pen triggered the no-confidence vote. Barnier had already granted her some concessions, worth about 10 billion euros, as part of his 60-billion-euro deficit-shrinking plan. If even more compromises are on the table, the deficit next year will probably exceed the 5% of GDP which had been Barnier’s modest target.
The French president’s second option, worse than the previous one, would be to appoint a prime minister from either Le Pen’s party or the New Popular Front, an assembly of left-leaning groups including Jean-Luc Mélenchon’s La France Insoumise. Macron might hope that doing so would show voters that either of these players is unable to govern. That would leave deficit-reduction on the backburner. During the parliamentary election campaign, the left presented a programme that could have added 180 billion euros a year to the French deficit, according to independent think tank Institut Montaigne. The same organisation predicted that the pledges of Le Pen’s party would have worsened the budget shortfall by more than 70 billion euros.
Finally, there’s Macron’s ugly option. Faced with the impossibility of finding a prime minister able to broker a compromise on the budget, he could resign. That would force France into the uncertainty of a presidential election campaign, from which Le Pen may emerge as the winner. Candidates would pay lip service to the need for fiscal restraint while competing on spending pledges and unfunded tax cuts. In the meantime, France would find it even harder to adopt a budget. Fiscal restraint would be kicked into the long grass, increasing the severity of the fiscal austerity that will be required in a few years’ time.
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CONTEXT NEWS
French far-right and left-wing parties on Dec. 2 submitted no-confidence motions against Prime Minister Michel Barnier, meaning the government is likely to collapse.
Together, lawmakers from the anti-immigration Rassemblement National and the leftist La France Insoumise have enough votes to topple Barnier in a vote likely to be held on Dec. 4.
The no-confidence motions were tabled after Barnier used a constitutional tool to ram through some 60 billion euros’ worth of savings through parliament without a vote.
Graphic: France’s stubbornly high budget deficit https://reut.rs/3B1hcRs
Editing by Liam Proud and Oliver Taslic
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