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France’s government teetered on the brink of collapse on Monday, as Prime Minister Michel Barnier dared a divisive parliament to topple his administration over its tax and spending plans.
Opposition parties to the left and right of Barnier said on Monday they would vote to remove his minority government after he vowed to impose the budget measures without parliamentary approval.
The political crisis that engulfed France it comes just weeks after the collapse of Olaf Scholz’s German coalition, leaving the EU’s two most powerful states in limbo.
“We have arrived at the moment of truth” Barnier he said on Monday. “Now it’s up to members of parliament to decide whether our country gets a responsible, necessary budget or we step into uncharted territory.”
In an attempt to push through part of a 60 billion euro package of tax increases and spending cuts, he activated Article 49.3 of the French constitution, which allows the government to bypass parliament to pass legislation, but only if it can survive a no-confidence vote.
Shortly after the move, Marine Le Pen confirmed her far-right National Rally party would vote to oust Barnier, while far-left France Unbowed party also said it would table a no-confidence motion.
If Barnier’s government fails such a vote, which could take place as early as Wednesday, it would make him France’s shortest-serving prime minister since the Fifth Republic was established in 1958.
Emmanuel Macron appointed Barnier to the post in September, after the president’s summer election gamble backfired, leaving his centrist coalition far short of a majority in the National Assembly.
Macron would have to appoint a second prime minister if the no-confidence motion succeeds, as further parliamentary elections cannot be held until 12 months after the July election.
“Investors are worried that France will be left without a rudder if the government fails on (a) no-confidence vote,” said Chris Turner, global head of markets at ING. He added that this dynamic “increases discomfort in the eurozone”.
The French bond market has been hit by political turmoil in the past two weeks, with borrowing costs rising close to those in Greece. They weakened on Monday after Barnier’s move, pushing the closely watched 10-year spread over German yields to 0.87 percentage points, close to a recent 12-year high.
The euro continued to weaken in response to the crisis, falling 0.8 percent against the dollar to $1.048 by early evening, while French shares ended the day flat.
Le Pen criticized Barnier for not heeding her party’s demands to protect French citizens from social security measures she said would erode their purchasing power.
“The French have had enough,” she said. “Maybe they thought things would be better with Michel Barnier, but they were even worse.”
On Monday, Barnier was in the final negotiations with Le Pen over the fiscal package. The fate of the budget and the fate of the Barnier administration remained largely in the hands of Le Pen RN since it is the largest single party and a key voting block in the assembly.
But the talks proved fruitless, despite Barnier agreeing to two of the three RN demands.
“The game is effectively over for Barnier,” said Mujtaba Rahman of the Eurasia Group. “France will enter a second serious crisis in five months.”
