(Bloomberg) -- France’s political drama reached an apex Dec. 4 when the lower house of parliament toppled the government for the first time in more than 60 years. President Emmanuel Macron is scrambling to find a new prime minister with enough support to avoid the same fate as Michel Barnier, the outgoing premier.
But any new government would face the same financial and political constraints that sank Barnier’s administration. And since fresh legislative elections can’t be held until July at the earliest, there isn’t a quick fix to the country’s gridlock.
Why did Barnier’s government fall?
In June, Macron dissolved the lower house of parliament in what he said was an effort to bring clarity to French politics after Marine Le Pen’s far-right National Rally triumphed in European elections. The gamble backfired, delivering a National Assembly split into three irreconcilable blocs — a leftist alliance, a shrunken center backing Macron, and an expanded nationalist group led by Le Pen.
Macron took two months to appoint Barnier, hoping the former Brexit negotiator could navigate the deep divisions. But 2025 budget discussions exacerbated tensions, and when the premier used a constitutional tool to bypass a vote on a related bill, Le Pen joined forces with the left to support a no-confidence motion that brought down the government.
Le Pen’s party was demanding concessions from Barnier over his plans for €60 billion ($63.4 billion) of tax hikes and spending cuts to bring the deficit to 5% of economic output from 6.1%, closer in line with stricter European Union regulations.
Barnier made multiple concessions to far right demands to shelter households from the belt-tightening. But Le Pen said it was insufficient and the premier lacked respect for her voters.
What happens next?
The French president is solely responsible for picking a new premier, but there is no constitutional time limit for a decision. Once named, that person will propose a cabinet to be appointed by Macron.
Macron said in an address to the nation Dec. 5 that he’d appoint a new premier in the “coming days,” seeking to move faster than when he chose Barnier as France urgently needs to address its fiscal challenges.
The first responsibility for the new cabinet will be to propose special legislation to avoid a shutdown before passing a new budget early next year. Opposition parties have said they will support the stopgap bill to authorize the state to collect taxes and conduct the minimum spending to avoid turmoil.
Who could be the new prime minister?
There is no obvious candidate capable of commanding a majority in the bitterly divided National Assembly. Barnier was vulnerable from the start as he came from a center-right party that had fewer than 10% of the lawmakers in the lower house.
Macron allies have said a prime minister who could build an alliance with the center left could bring more stability. One option is Francois Bayrou, a veteran centrist closely tied to Macron who over a long political career has sought to work with both Socialists and conservatives.
France’s president could also pick someone from his outgoing cabinet such as Sebastien Lecornu, in charge of defense, or Bruno Retailleau, interior minister.
Bernard Cazeneuve, a former prime minister for Socialist President Francois Hollande, is also often cited after Macron considered appointing him instead of Barnier.
Why is the left key?
When Macron called the snap election in June, leftist parties papered over deep-rooted differences to form the New Popular Front (NPF), which went on to secure the largest bloc of seats in the lower house. That tied the more moderate Socialist party, where Macron began his political career, to Jean-Luc Melenchon’s far left France Unbowed.
The large number of lawmakers from the NPF, and its desire to bring down Barnier’s government, made Le Pen the assembly’s power broker, since support from her National Rally would assure enough votes to pass a no-confidence motion proposed by the left-wing coalition.
To avoid a repeat, Macron and his new prime minister must find a way to prise apart the NPF and secure the implicit backing of moderates to not censure the administration.
Socialist leader Olivier Faure said on Dec. 6 that he was ready to start talking with Macron about possible support for a new government led by a prime minister from the left.
How are markets reacting?
The uncertainty in Paris over the future of Barnier’s government and its budget fueled investor concerns about the country’s already stretched public finances in recent weeks. Under selling pressure, the state’s borrowing costs compared to peers rose at one point to highs not seen since the euro zone’s debt crisis more than a decade ago.
However, markets calmed as opposition parties indicated willingness to be more cooperative after the collapse of Barnier’s government. French government bonds rallied for a fourth day on Dec. 6, driving down the 10-year yield over German equivalents to a level last seen on Nov. 20.
What is behind Macron’s decline?
Seven years ago, Macron’s promise of economic reforms to free France from a straitjacket of regulation and taxation resonated with voters who’d lost patience with the traditional parties. But during his presidency, policies from energy taxation to raising the retirement age angered broad swathes of the electorate.
As Macron’s star faded, Le Pen exploited resentment of policies seen as favoring the rich at the expense of workers and the middle classes. The sharpest inflation surge in a generation further stirred the resentment.
In today’s political impasse, some opposition parties have called on Macron to resign. But the president is insistent that he will continue to the end of his second term in 2027.
“We have 30 months left of the mandate you have given me,” Macron said in an address to the nation on the evening of Dec. 5. “Thirty months for the government to be able to act to make France a fairer and stronger country.”
--With assistance from Ania Nussbaum and Tom Fevrier.
©2024 Bloomberg L.P.
