France government collapse: Economic and political crisis set to worsen?

By Rabia Ali

ISTANBUL (AA) – The collapse of the French government, following the National Assembly’s vote to oust Prime Minister Michel Barnier, has raised significant concerns about the nation’s political and economic trajectory.

Barnier, who served as prime minister for only three months, resigned after a majority of lawmakers backed a no-confidence motion against him.

The fallout has left France grappling with uncertainty over its leadership and the 2025 budget, highlighting the challenges ahead in navigating political divisions and economic pressures.

- Political instability and divisions

France now finds itself in a state of political upheaval, with a fractured National Assembly and no possibility of parliamentary elections until July 2025 due to constitutional constraints.

President Emmanuel Macron, who is in power until 2027, has said he will select a new prime minister “in the coming days” to form a government of “general interest.”

This announcement follows months of political instability, exacerbated by Macron’s centrist bloc’s failure to secure dominance and the far-right National Rally (RN) winning the European Parliament elections earlier this year.

In response, Macron called for snap parliamentary elections in late June.

However, these elections failed to produce a clear majority, as no party managed to secure the 289 seats required for absolute control in the National Assembly.

Alexander Seale, a French political analyst, predicts turbulent months ahead.

“The next five to six months will be quite tense because it all depends if the far-left and the far-right like this new prime minister,” he explained.

Macron, he said, faces the challenge of selecting a premier who can navigate the deeply divided political spectrum.

“He will have to propose a new budget and also deal with these divided parties in the National Assembly. He has to work with the far right, with the far left, and also with Macron’s party," Seale added.

The president has been meeting with heads of political parties and other key figures, though notably excluding far-left La France Insoumise and the Greens.

Potential names going around for the next prime minister include Defense Minister Sebastien Lecornu and Interior Minister Bruno Retailleau, said Seale, while cautioning that Macron could opt for a surprise pick from outside established circles.

- Budget crisis and fiscal dilemma

France's political crisis comes against the backdrop of a deepening fiscal crisis.

The no-confidence vote against Barnier followed his decision to use discretionary powers to pass a controversial social security budget bill without a parliamentary vote.

Macron has emphasized that the next government’s priority will be addressing the budget crisis, and it would propose a “special law” by mid-December to ensure public service continuity.

Barnier’s proposed plan aimed to reduce France’s public deficit from an estimated 6.1% this year to 5% by 2025.

However, his use of Article 49.3 of the Constitution to bypass debate sparked widespread backlash, particularly from far-left and far-right factions.

Seale noted that most parties were not opposed to the budget itself but had sought amendments that were ignored.

“If Barnier had allowed this social security budget to go through votes in parliament, he would have been able to stay on as prime minister,” he said, adding that the far right in particular wanted Barnier to incorporate their proposals.

The incoming prime minister will face the daunting task of crafting a new budget in January.

“The prime minister will have to think about a new budget. It could be a different budget than Barnier’s budget … but what’s really interesting and important is that they have to try to save about €50 billion ($52 billion) because France is in debt like all other European countries,” said Seale.

- Bleak financial future

The ongoing political crisis has compounded France’s economic troubles. The country, one of Europe’s largest economies, is grappling with high public debt, soaring energy prices, and rising interest rates.

Credit rating agency Moody’s has already flagged the government collapse as a setback for efforts to consolidate France’s public finances, warning of an escalating political impasse.

Meanwhile, according to a German broadcaster DW, bankruptcy rates in France are rising, with an estimated 65,000 companies expected to file for insolvency this year, compared to 56,000 in 2023.

Economists also anticipate more layoffs and sluggish economic growth in the coming months.

Rama Yade, senior director of the Atlantic Council’s Africa Center and a senior fellow with the Europe Center, painted a grim picture of the nation’s fiscal health.

“Public debt that has increased by more than half in seven years, from €2 trillion to €3.2 trillion … Not to mention, France has 9 million people living in poverty, an increase in factory closures, and a foreign trade deficit of around €100 billion in 2023 – a sign of an accelerated deindustrialization of the French economy,” Yade recently wrote.

While a US-style government shutdown is unlikely, the economic crisis could still have severe repercussions.

“France’s economy is a bit chaotic at the moment because people have to wait and see what a new budget will look like,” said Seale.

A new budget will have to address key issues such as healthcare spending, military investments in light of the war in Ukraine, and energy costs.

At the moment, these factors, coupled with inflation, have left many French citizens struggling to pay utility bills or afford fuel for their cars, he added.