Is France On The Cusp Of Another Political Crisis?

Forbes

3 hours ago

France's Prime Minister Francois Bayrou gestures during the political TV show "L'Evenement" (The ... More Event) broadcast on French TV channel France 2, in Paris, on December 19, 2024. Francois Bayrou said he hoped to name a government "over the weekend", "in any case before Christmas" and that a budget would be adopted "in mid-February", although work on this was interrupted by the motion of censure that toppled the previous government. (Photo by Valentine CHAPUIS / AFP) (Photo by VALENTINE CHAPUIS/AFP via Getty Images)
France has now gone through three governments in the past year, each one effectively failing to clear the hurdle of passing a fiscally responsible budget. Major stumbling block here is pension reform – two years ago a proposal to raise the headline pension age met with widespread protest. Since then various governments have tried to find ways to offset the pension burden – one notable strategy is to drop the inflation indexation of pensions (a key pillar of the forthcoming budget process is likely to centre on not indexing government disbursements for a year).
Prime minister Francois Bayrou has tried to find ways of building a consensus on pension reform – including a broad conclave on pensions, the idea being to raise the formal pension age to 64. This has now run aground, with the Socialists opposing it (their electorate is very sensitive to the topic) and they have threatened to vote against the government in a potential left-wing inspired vote of confidence. The far-right Rassemblement had declared that it would not support such a vote and the manner in which the Socialists had approached the process was slip-shod.
Recall that the government has so far staying in power through a 'no-dissolution' pact with the Socialists, so any parliamentary vote where the Socialists vote against the government could result in the collapse of the government (with the collaboration of the Rassemblement and the far-left), and this could be close to fatal for President Macron.
Bayrou has not been a convincing performer in his six months in the job, and one option for the President is to replace him, with say the minister for finance Eric Lombard, or to simply swerve the issue of pension reform altogether – which itself would be a defeat of sorts. Other more ambitious longer term pension reforms are now off the table for the time being. As result the budget process now becomes even more complicated beacuse Bayrou's actions have cut off one of the obvious avenues for the government to cut back spending.
International events have given Emmanuel Macron a new platform away from domestic troubles, but Francois Bayrou has in effect imperiled his government on pension reform and the government is again on shaky foundations. The stark reality is that with a first outline of the 2026 budget due in a few weeks, France is limping towards a fiscal crisis.
At a time when bond yields across the euro-zone have converged and when the imperative to boost defence spending and embark on the investment and savings union (capital markets union) is rising, Europe needs a strong France and the involvement of Emmanuel Macron. Instead, his tenure is now marked by fiscal failure that will shape the future of the French economy and society for the decade to come. Only higher taxes or dramatically lower government spending can stop the financial demise of France. Macron and none of the opposition parties will countenance this and whomever becomes the next president of France will take up a poisoned chalice.