World
December 4, 2024 21:00
paris - France is once again in a state of political chaos following the fall of the Barnier cabinet after a vote of no confidence. The left-wing coalition Nouveau Front Populaire (NFP) and the far-right party Rassemblement National (RN) disagreed with the billions of euros in budget cuts deemed necessary by Barnier to reduce the budget deficit and national debt.
France is once again in a state of political chaos following the fall of the Barnier cabinet after a vote of no confidence. The left-wing coalition Nouveau Front Populaire (NFP) and the far-right party Rassemblement National (RN) disagreed with the billions of euros in budget cuts deemed necessary by Barnier to reduce the budget deficit and national debt.
On Wednesday, December 4th, the vote of no confidence was brought to the Assemblée Nationale. With a majority of 331 votes, the motion was passed, forcing Barnier to resign. He is the second French head of government to be brought down by a vote of no confidence, following Georges Pompidou in 1962. Barnier, who was in office for just 91 days, claimed to have 'too little time' to implement his plans, given the difficult political landscape. Since the parliamentary elections last summer, the Assemblée Nationale has been divided into three opposing blocs. Just before the vote, Barnier warned the parliamentarians that 'the national debt does not disappear with a new government.'
Budget Rejection
As a result of the cabinet's collapse, not only was the budget for social security rejected, but the national budget was also suspended. This comes at a time when the country faces financial difficulties. The suspension of the budget will lead to an increase in income tax. Approximately 17.6 million taxpayers will see their taxes rise. About 380,000 households that were previously tax-exempt will become tax payers," said Éric Heyer, director of the Analysis and Forecasts department at OFCE. For the most modest taxpayers, this could mean an extra 50-60 euros, and up to 400 euros for the wealthiest households. However, these increases only apply to households whose incomes 'have kept pace with inflation,' Heyer emphasized, adding that the fiscal gain for the state would be '3 billion euros.'
In addition to an increase in income tax, the rejection of the budget spells the end of emergency aid for French farmers. The government had allocated nearly 400 million euros for the agricultural sector to provide solutions to struggling farmers. Moreover, the military programming law is at risk amid an unstable geopolitical context.
Financial markets have been unsettled by the political situation in France for some time now. If the national debt is not reduced, government debt servicing costs will further increase. 'Our debt is not held by the French, but by Japanese and American pension funds,' warned Bruno Retailleau, Minister of the Interior on CNews. 'Last week, our debt cost more in interest than the Greek state debt. This means that Greek debt has more credit than ours,' he added. 'We will borrow 300 billion next year, which is huge. In 2027, all income tax will be used to pay off the debt interest!"
Emmanuel Macron will now have to find a new prime minister who can garner enough support within the divided parliament, even beyond his own ranks. New parliamentary elections are currently ruled out; legally, they can only be held in July, a year after the last elections.