12/6 – International News Update

France plunges deeper into political and economic uncertainty following the dramatic ousting of Prime Minister Michel Barnier by the National Assembly on Wednesday night. The collapse of the government signals a critical moment for President Emmanuel Macron, who must now confront a crisis with far-reaching implications for both France and the eurozone.

The Downfall of Michel Barnier

331 of the 577 lawmakers in Parliament voted to pass a no-confidence motion against Barnier, following his controversial attempts to push through an austere budget aimed at curbing the country’s deficit. The prime minister’s resignation on Thursday makes him the shortest-serving leader in modern French history and the first to be ousted by parliament since 1962.

Barnier’s proposed budget included €40 billion in spending cuts and €20 billion in tax hikes to address a deficit projected at 6.1% of GDP. His efforts, however, failed to rally support, with the fractured Assembly uniting across ideological divides to block his plans. The far-right National Rally, led by Marine Le Pen, and the hard-left France Unbowed, led by Jean-Luc Mélenchon, joined forces to reject the fiscal measures, branding them as oppressive and out of touch with voters’ struggles.

Spotlight Back on Macron

The political turmoil has intensified calls for Macron’s resignation, with opposition leaders blaming him for the crisis. Le Pen accused Macron of “sacrificing France” for his own political vanity, while hard-left leader Mathilde Panot declared the vote a rejection of Macron’s broader policies. Despite these calls, Macron reaffirmed his intent to stay in office until his term ends in 2027.

In a televised address to the nation on Thursday, Macron announced plans to appoint a new prime minister “in the coming days.” He acknowledged the fractured political landscape, urging parties across the spectrum to cooperate with the incoming government or refrain from obstructing its efforts. The president placed immediate emphasis on adopting a 2025 budget, promising to introduce emergency measures by mid-December to prevent a fiscal gap.

Macron’s decision to call a snap election earlier this year yielded a fragmented Assembly with no party or coalition commanding a majority. This gridlock has paralyzed the legislative process, leaving France at risk of entering 2025 without a clear fiscal plan.

The political chaos could risk efforts to reduce France’s fiscal deficit. The country’s mounting debt—now at 110% of GDP—alongside sluggish economic growth of just 1% per year, has rattled financial markets. While France has so far avoided the sharp borrowing costs seen during the eurozone crisis, the current trajectory has drawn comparisons to the profligacy of nations like Greece and Italy.

A Broader European Crisis

France’s political crisis reflects a broader challenge facing Europe, where fragmented governments and polarized electorates hinder decisive action. Across the continent, rising defense expenditures, ageing populations, and external economic pressures are stretching national budgets. In France, the electorate’s reluctance to embrace fiscal discipline has fueled the rise of extremist parties, creating a volatile environment where centrist coalitions struggle to survive.

The implications extend beyond France. Without stable leadership from Europe’s second-largest economy, the European Union faces difficulties in advancing collective solutions to shared challenges, including security and economic competitiveness.

What now?

Macron’s immediate task is to assemble a government capable of navigating the crisis and restoring confidence in France’s ability to govern effectively. However, achieving consensus in a deeply divided Assembly remains a formidable challenge. With new elections off the table until mid-2025, France faces the prospect of a series of fragile minority governments unable to enact significant reforms.

The crisis has also raised the specter of further polarization. If centrist coalitions continue to falter, France risks an even sharper turn toward political extremes, with the potential for a far-right government or Le Pen presidency in the near future.

As Macron prepares to unveil his next steps, the stakes for France and the broader eurozone have never been higher. Whether his leadership can steer the country through this tumultuous period will shape the trajectory of France’s political and economic future—and its role in Europe’s evolving landscape.