Turmoil in the French Economy

France is no stranger to government overthrow. From King Louis XIV to Maximilien Robespierre and Napoleon Bonaparte, the country’s history has shown no remorse to leaders who fall out of favour. 2024 has proven no different as Michel Barnier, the current Prime Minister of France, faces serious challenges to his leadership. 

The government’s troubles come after significant economic turmoil in the country as they struggle to pass a deficit-free budget to avoid problems with the European Union; The 2024 budget deficit currently stands at 6.1% of their total GDP, more than double the EU limit of 3%. The proposed budget aims to bring that number down significantly, and while Brussels may be pleased with the blueprint provided, the €20 billion Euros in tax increases, combined with €40 billion in cuts across multiple public sectors, has not been popular amongst the nation’s citizenry.

The current government’s unwillingness to budge during negotiations has put them under significant pressure from multiple political parties in France, especially the National Rally, led by Marine Le Pen, who has been the most outspoken in bringing down the French government if negotiations were not completed satisfactorily.

While in theory, the budget could be passed by force in the lower house via a constitutional article, such a move would make the government vulnerable to a vote of no-confidence, which Le Pen is more than willing to form a bloc with the Far Left Alliance to pass and take down President Emmanuel Macron’s party.

The recent turmoil is reflected in the nation's economic confidence, as bond yields in France reach 3.2%, above that ofGreece, a nation notorious for economic instability since the financial crash of 2008. Investors are showing historically low levels of confidence, amplified by the fact that the EU no longer buys the bonds of financially distressed member countries in a similar fashion to a decade ago.

France isn’t the only European Union country in significant trouble; the German state faces a similar vote of no confidence paired with economic troubles. A French government failure, alongside a German one, is a worst case scenario for the European Union, especially heading into a Donald Trump presidency.

While it would be in the continent’s best interest to see a stable French government and a sound national budget, it remains to be seen if negotiations are going to be more amicable; alternatively, the French can expect to pull out the (political) guillotines once more.

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