Paris stocks and the euro fell on Monday as a budget impasse in France fueled concerns about the eurozone’s second-largest economy.
French Prime Minister Michel Barnier faces the biggest risk yet of being ousted by a hostile parliament as his government on Monday unveils a social security funding plan that has angered the opposition.
Barnier, a conservative appointed by President Emmanuel Macron in September after an inconclusive general election, does not have a majority in parliament and lives under the constant threat of a no-confidence vote that, if successful, would force him and his team to step down.
Key to any such vote is Marine Le Pen, the parliamentary leader of the far-right National Rally (RN), who has voiced her opposition to several aspects of the government’s 2025 budget plan, including a social security funding project that will be debated in the lower house. – home National Assembly on Monday afternoon.
These include a planned reduction in employers’ social security contributions, the partial abolition of indexation of pensions to inflation and a less generous prescription drug reimbursement policy.
If Barnier fails to find a parliamentary majority to back the measures, he is expected to use executive powers to pass them without a vote, a procedure called “49.3” after the constitutional article detailing the prerogative.
Such a move, however, would trigger a no-confidence vote that could only survive if Le Pen’s party abstained, and Barnier has little hope of finding any support from the left of centre.
A no-confidence motion could follow as early as Wednesday, and concerns over the outcome have sent the euro to near 14-month lows.
If the government falls because of Article 49.3, it would be the first successful no-confidence vote since the defeat of Georges Pompidou’s government in 1962, when Charles de Gaulle was president.
‘Accept negotiation’
RN party leader Jordan Bardella said on Monday morning that such a proposal was likely.
“The National Assembly will launch a vote of confidence, unless of course a miracle happens at the last minute,” he told RTL radio.
Le Pen reacted icily on Sunday after Budget Minister Laurent Saint-Martin said the government was not planning any further changes to the social security budget plan.
“We have taken note of it,” she told AFP, calling the stance “extremely closed-minded and partisan.”
She demanded in an interview with the Sunday edition of La Tribune that Barnier accept further “discussion” about her party’s wishes.
“All Mr Barnier has to do is accept the negotiations,” she said.
RN is the largest in the National Assembly with 577 seats, with more than 140 representatives.
On Thursday, Barnier already abandoned the previously planned increase in electricity taxes, yielding to critics.
Budget Minister Laurent Saint-Martin pointed to the work done on budget proposals in a parliamentary committee ahead of Monday’s debate, saying the current proposal was already the result of a compromise between members of the National Assembly and members of France’s upper house, the Senate.
“Rejecting this text is rejecting the democratic agreement,” he said.
‘Open for dialogue’
The right-wing majority Senate partially approved the government’s 2025 budget on Sunday, giving the green light to its revenue projections, in a vote boycotted by the left.
Government spokeswoman Maud Bregeon said on Monday that Barnier’s team remained “open to dialogue” to find a compromise.
The government can still modify its draft law until the last minute, and National Assembly Speaker Yael Braun-Pivet on Sunday urged Barnier to do so.
“From the beginning, I called on the government to negotiate with different political groups in the National Assembly,” she told Radio J.
The Socialist Party, part of the left-wing opposition, told Barnier it would vote against him if he invoked Article 49.3, saying he would have “no other choice”.
Saint-Martin warned that a government collapse would increase the risk premium on French government debt, which has reached unusually high levels due to the country’s volatile financial situation.
France avoided a debt downgrade by S&P last week, with the rating agency saying that “despite ongoing political uncertainty, we expect France to align – with a delay – to the EU’s fiscal framework and gradually consolidate public finance”.
Barnier has pledged to improve France’s fiscal position by 60 billion euros ($64 billion) by 2025 in hopes of reducing the public sector deficit to five percent of gross domestic product, from 6.1 percent of GDP this year.
