France’s Prime Minister Michel Barnier has warned of “a big storm and very serious turbulence on the financial markets “if the budget recently agreed by the government is challenged and overturned in the country’s parliament.
Barnier was appointed to his position at the start of September, following a snap general election earlier in the summer that failed to produce a clear winner and resulted in months of political deadlock.
In early October, a budget for 2025 was put forward that aimed to bring under control France’s growing deficit, through a combination of cuts of just over 41 billion euros ($43.2 billion) and around 20 billion euros of tax increases.
The measures, it was hoped, would bring France’s national deficit down to 5 percent of its gross domestic product next year, which is still well above the European Union-required target of below 3 percent by 2029.
Marine Le Pen, one of the leading figures in the far-right National Rally party, has labelled the budget “bad, unfair, and brutal”, and threatened to call a no-confidence vote in the government, which could potentially mean the year ending in the worst possible circumstances for France’s President Emmanuel Macron.
He called the snap election in the summer to see off the threat of National Rally in parliament, but ended up with a left-wing coalition, which is no more politically sympathetic to him, taking the most seats instead.
The election for the 577-seat National Assembly saw the left-wing bloc win 188 seats, Macron’s centrist alliance took 161 and National Rally came third with 142 seats.
At the same time, as she potentially holds the fate of the government in her hands, Le Pen herself could be facing a ban from running for public office in the new year over an unrelated trial on charges of embezzling funds from the European Union’s parliament.
Barnier’s worries will have increased following an hour-long meeting with members of the French Socialist Party on Wednesday that failed to win him any more backing.
Patrick Kanner, the Socialist group leader in the French Senate, told French broadcaster BFM that although the meeting had not been an angry one, Barnier had not put forward “any concrete proposals” to convince its members to support his minority coalition government.
Kanner said Barnier represents “a continuation of the policies pursued for the past seven years by Emmanuel Macron, which have resulted in an unprecedented deficit”.
The Politico website reported that an opinion poll published last weekend showed that 53 percent of respondents backed a vote of no confidence, including two-thirds of National Rally supporters and nearly three-quarters of Socialist supporters.
On Wednesday, French sovereign bonds and stocks fell as concerns mounted over the prospect of the government being toppled by the issue.
Shares in banks and insurers were among those hardest-hit, with Axa losing 4.3 percent of value and Societe Generale 3.5 percent.
“The sell-off is on fears over a potential collapse of the Barnier government,” Gareth Hill, a bond fund manager at Royal London Asset Management, told the Financial Times.
If the budget was not passed, he added, the challenge of bringing down the debt load would become “even harder”, but he also commented that he expected Barnier and Le Pen to extract concessions from one another, and come to some sort of agreement that may avert a full-blown crisis.