France’s political turmoil intensified on Thursday after Prime Minister Michel Barnier resigned following a no-confidence vote by far-right and left-wing lawmakers. The vote, which toppled his government, has plunged the country into greater uncertainty, with the French economy now facing a more difficult path to address its growing fiscal deficit.
Barnier’s government, which only began in September, is the shortest-lived in modern French history.
President Emmanuel Macron, who had appointed Barnier just three months ago, met with him to discuss the resignation, but there was no official confirmation immediately.
Barnier’s resignation comes after his attempt to push through the 2025 budget without a vote, using the controversial article 49.3 of the French constitution.
This move led to a no-confidence vote, resulting in his ouster. Macron now faces growing calls for his resignation, with a recent online poll showing 64% of voters want him to step down.
The resignation leaves France without clear leadership at a crucial time, especially as the country struggles with its ailing public finances.
The government’s budgetary reforms, including a EUR 60 billion cut aimed at reducing France’s public-sector deficit, have encountered resistance from both the far-left and far-right.
These political divisions have complicated Barnier’s efforts to govern, and the new prime minister will face the same challenges in pushing through the budget in a deeply divided parliament.
Macron’s move to dissolve parliament and call for early elections in June has been blamed for exacerbating the political deadlock. Marine Le Pen of the far-right National Rally (RN) criticized Macron for creating this crisis, stating that his actions had caused a significant divide between him and the French people.
Le Pen’s party, which is now part of the coalition that helped bring down Barnier’s government, has continued to gain strength.
The political instability comes at a time when the European Union is already reeling from the collapse of Germany’s coalition government. France’s political uncertainty has further rattled investors, with analysts warning that it could keep the risk premium on French assets elevated.
This is expected to dampen both investment and consumer spending, further weakening the country’s economic outlook. France’s sovereign bonds and stocks have already been affected by the ongoing crisis, and markets are anxiously awaiting what happens next.
Under French constitutional rules, there cannot be a new parliamentary election until July, leaving the country in a prolonged state of uncertainty. This delay could worsen the risk for France’s financial stability, especially with a potential shift in U.S. policy following Donald Trump’s return to the White House in January.
There is also the risk that political instability will continue to prevent significant fiscal reforms, making it harder for the country to reduce its deficit and restore financial health.
As Barnier’s government collapses, Macron is now under immense pressure to find a replacement. Macron has indicated that he hopes to appoint a new prime minister before the reopening of the Notre-Dame Cathedral on Saturday, where global leaders including Trump are expected to attend. However, with the political landscape so fractured, it remains uncertain whether a new leader can navigate the complex challenges ahead.
In the aftermath of Barnier’s fall, Standard & Poor’s warned that the most likely outcome for France is a delay in fiscal tightening, making it more difficult to achieve the planned deficit reduction. While Barnier’s administration focused on pushing through fiscal reforms, the political gridlock now suggests that much-needed austerity measures may be put on hold.