French President Emmanuel Macron delivering his televised New Year’s address to the nation from the Elysee Palace in Paris on Dec. 31, 2024.
Kiran Ridley | Afp | Getty Images
As France enters the new year, there’s little hope that the political and economic uncertainty that’s been plaguing the euro zone’s second-largest economy for months will disappear in 2025.
France was plunged into a political crisis last summer when snap parliamentary elections, called by President Emmanuel Macron, failed to produce a decisive result, with both far-left and far-right parties claiming victory in the polls.
Amid infighting over who should govern, Macron installed a centrist, conservative government which proved to be short-lived, with arguments over France’s 2025 budget sowing the seeds of its downfall — at the hands of the far left and far right — in a confidence vote in December.
A new minority government is now in place, but it faces the same challenges as before — how to get political rivals in France’s National Assembly to agree to spending and taxation plans for 2025 that reduce France’s budget deficit, forecast to hit 6.1% in 2024, and debt pile of 112% of gross domestic product, with both far above EU rules.
France’s political debacle has continued to rattle financial markets and raise concerns among economists: Credit ratings agency Moody’s downgraded France’s credit rating last month, warning that political fragmentation was “more likely to impede meaningful fiscal consolidation” and that the country’s public finances will be “substantially weakened over the coming years.” While most European markets managed to eke out gains in 2024, France’s CAC 40, beleaguered by political turbulence, fell 2.2% over the year.
Squawk Box Europe.“
“I think the only way to understand what is going on in France is not really to use an economic lens. Yes, there are plenty of economic problems that need to be attended to, including the budget, but the game that is being played is about the next presidential election, and so everybody is gearing themselves for the election. It’s meant to be in 2027 but some parties want it earlier so they are pushing for more of a crisis, and others are trying to gain time,” he noted.
“In a sense, you could say that France is not governable, and indeed, that’s why I’m not expecting much progress on the budget, really the minimum able to get through [parliament].”
Early election?
Sapir believes that if the new Bayrou government were brought down in a new confidence vote, calls for Macron to resign could intensify.
However, he noted that there is division between a range of political parties as to whether an early presidential election would be beneficial to their respective interests.
For the far left and far right, however, an election in 2025 might be preferable, Sapir noted, with both Jean-Luc Melenchon, the head of the far-left France Unbowed (La France Insoumise) and far-right National Rally (Rassemblement Nationale) figurehead Marine Le Pen fancying their chances in an earlier vote.
“Many others don’t want either Le Pen or Melanchon [in power], so they will not want to have the election in 2025 so this is really, I think, the game that is being played. For Le Pen and Melanchon, 2025 would be ideal time.”