Government fall in France: Macron under pressure in political crisis – EU looks to Paris

After the center-right government in France was overthrown by the opposition, head of state Emmanuel Macron has rejected calls to resign. In an address to the population that evening, he said: “The mandate that you have democratically entrusted to me is a five-year mandate and I will carry it out in full until its end.”

“We cannot afford divisions or standstill,” said Macron. He will appoint a new prime minister “in the next few days” and task him with forming a government that represents all political forces that are willing to take part – or at least undertake not to overthrow them with another vote of no confidence bring.

New compromises for France

The priority will be the budget for the coming year. “From today, a new era must begin in which everyone must act for France and new compromises must be built,” said the president.

The previous Prime Minister Michel Barnier resigned after a successful vote of no confidence in his center-right government. Macron asked Barnier to temporarily remain in office with his government as caretaker.

The populist forces on the left and right fringes of parliament, which brought down Barnier on Wednesday evening in the dispute over an austerity budget, are now targeting Macron and are talking about his resignation and an early presidential election.

The fall of the government puts Macron under massive pressure

It’s not just the opposition that accuses Macron of having triggered, or at least worsened, the political crisis in France with an unclear majority in parliament with early elections last summer. Macron is now under increased pressure from within his own ranks to appoint a new head of government as quickly as possible who will unite the divided camps in parliament so that the long overdue budget can be passed and important projects can be initiated.

Meanwhile, the right-wing nationalist Marine Le Pen and the old leftist Jean-Luc Mélenchon are accused by the government camp of fanning the political crisis in France. Their aim is to bring Macron down early so that they can then run in an early presidential election. Macron cannot run again after two terms in office.

The president’s way out of the crisis

Quickly appointing a new prime minister could help Macron strengthen his frayed position, salvage his remaining term until 2027 and dampen calls for his resignation. The faster a new government starts work, the faster the French budget crisis could consolidate and there could be reassuring signals towards the economy and financial markets.

Macron was already holding talks from midday to explore who could be considered as the future prime minister. It’s not just the candidate’s profile that has to fit.

Given the difficult balance of power in parliament, in which neither the left-wing alliance nor Macron’s camp nor the right-wing nationalists have a majority, the future prime minister must have a connection to all blocs in parliament if possible. Names are already circulating, without any obvious favorites initially emerging.

The Paris budget problem

The public debt burden in France has become increasingly out of control and the EU Commission is conducting excessive deficit proceedings against France because of excessive new debt. The austerity budget that collapsed Barnier’s government is a bitter necessity.

This year, France expects a budget deficit of 6.1 percent, which is far away from the European limit of three percent.

Predicament is slowing down France’s economy

Given the political impasse in France, the confidence of domestic and foreign companies has been disrupted. Investments are being delayed and the business location is in danger of being damaged.

The industrialized nations organization OECD warned that without a budget agreement, the expected economic growth would be at risk and tax revenue would be reduced. Barnier warned that political instability would mean higher risk premiums on government loans and additional billions in costs for the country.

Impact on EU policy still unclear

It is still unclear how the chaos in France will affect EU politics. According to diplomats in Brussels, a lot will depend on what happens in Paris in the next few weeks and months.

It could therefore become particularly problematic if EU decisions have to be made that require new financial commitments from France – for example for new aid for Ukraine. At the moment this is not specifically foreseeable. However, the change of government in the USA in January is seen as a major uncertainty factor with the question of whether the new US President Donald Trump will force the EU to take on more responsibility.