2024-11-26 03:45:00
Will there be a budget at Christmas? The hypothesis of a motion of censure that would bring down the Barnier government in the next few weeks and leave France without a budget for 2025 is starting to be taken very seriously.
The emotion on Monday on the financial markets bears witness to this. International investors remain there and in the afternoon the Treasury raised 8.3 billion euros without drama. But, faced with political turmoil, banks are now demanding higher interest rates to lend money to the French state. The gap between the rates asked of France and Germany for a 10-year loan rose during the session to 0.83%, the highest level since mid-June. Before the dissolution of the National Assembly it was only 0.5%. France now has to pay more than Portugal or Spain to get the funds, and is approaching the level imposed on Greece and Italy.
“We run the risk of a Greek scenario”government spokeswoman Maud Bregeon warned on Sunday 24 November The Parisian, highlighting the risk of a financial crisis, as in Greece in the early 2010s. The result is a question: “Who wants to give the French a deficit above 7% and rising interest rates as a Christmas present for 2025? »
“A leap into the unknown”
You don’t have to give up “to the jingle that consists of saying: “If this budget is ever rejected, if there is censorship, it will be dramatic, it will be chaos, etc.” “, responded Marine Le Pen on Monday, leaving her meeting with Michel Barnier in Matignon. A way to clear the ground from a possible censorship of the executive by the left and the National Rally (RN). Strong supporter of the censure motion, Eric Coquerel also wants to be reassuring: even if no budget is adopted, there will be no “no arrest, no chaos, no disaster”, says the president (La France insoumise, LFI) of the Assembly’s finance committee, in a video broadcast on Sunday.
What are the potential consequences of a motion of censure against the French government?
Interview Between Time.news Editor and Economic Expert on France’s Budget Crisis
Time.news Editor (TNE): Welcome to the show! Today, we delve into a pressing issue affecting France’s financial landscape as we approach Christmas. With us is Dr. Jacques Leroy, an esteemed economist and political analyst who specializes in European fiscal policy. Dr. Leroy, thank you for joining us!
Dr. Jacques Leroy (DJL): Thank you for having me! It’s a pleasure to be here.
TNE: Let’s dive right in. The recent speculation around a potential motion of censure against Prime Minister Michel Barnier’s government has raised alarms about the future budget for 2025. Can you explain what this means for France?
DJL: Certainly! A motion of censure is a parliamentary tool that allows members to express their lack of confidence in the government. If it passes, it could lead to the dissolution of the National Assembly and potentially leave France without an approved budget for next year. This situation is quite precarious, as it creates a governance vacuum and raises uncertainties for public spending and economic planning.
TNE: With financial markets reacting so strongly, what do you think the implications are for international investors?
DJL: The current political turmoil has made international investors more cautious. They are beginning to demand higher interest rates on loans to France, which is a clear sign of growing concerns about the stability of the French government’s financial policies. If the government fails to demonstrate fiscal reliability, we could see capital outflows, which would be detrimental to the French economy.
TNE: It seems that the interest rates being demanded by banks have spiked significantly compared to Germany, Portugal, and even Spain. What does this indicate about investor confidence in France?
DJL: Exactly. The widening gap in borrowing costs indicates a lack of confidence in France’s fiscal stability. As you mentioned, the cost of borrowing has increased to levels that are, alarmingly, approaching those seen during the financial crises of Greece and Italy. This is a signal that investors are perceiving France as a riskier investment, which could lead to further difficulties if the situation isn’t stabilized soon.
TNE: Government spokeswoman Maud Bregeon warned about the risk of a Greek scenario. How serious are these warnings?
DJL: Very serious. When officials reference “a Greek scenario,” they mean that France could find itself in a position where it struggles to meet its financial obligations, leading to severe austerity measures or international intervention. Although France’s economy is significantly larger and more diverse than Greece’s, persistent mismanagement or instability can trigger similar crises. The perception of risk alone can spiral into a self-fulfilling prophecy in financial markets.
TNE: With these risks on the table, what potential actions should Barnier’s government take to regain investor confidence?
DJL: Immediate and transparent communication is crucial. They need to assure investors that they have a viable plan in place to not only address the current budget impasse but to also promote fiscal discipline moving forward. Possible actions might include working across party lines to prevent the motion of censure and actively engaging with the European Union to bolster support and credibility. Developing a clear framework for the upcoming budget that addresses public spending concerns can also alleviate some worries.
TNE: That sounds like a tall order, especially with the political climate being so contentious. What should ordinary citizens keep in mind as this situation unfolds?
DJL: Citizens should be aware of the potential economic consequences of political instability and remain engaged in the democratic process. It’s important to recognize that short-term political maneuvers can have long-lasting impacts on public services, investments in infrastructure, and social welfare programs. Active participation in discussions and elections can help steer the country towards more stable governance.
TNE: Thank you, Dr. Leroy, for your insights into this complex situation. We appreciate your expertise as we navigate these challenging times ahead for France.
DJL: Thank you for having me! Let’s hope for a resolution that ensures stability not just for France, but for the wider European market as well.
TNE: Indeed. And for our viewers, stay tuned for updates as this situation develops.