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France is preparing for more political and economic upheavals as Prime Minister François Beyloux and his minority government appear to fall into trust votes later on Monday.
After Bayrou struggled to persuade him to support the 2026 budget, which is expected to cut by around 44 billion euros ($51.3 billion), he rarely gets the votes he needs to win the motion.
The aim was to reduce the French fiscal deficit from 5.8% of GDP in 2024 to 4.6% in 2026. This is a level far exceeding the European Union regulations of its members.
If Bayrou and his minority government fail to win the vote, the government will collapse within a year of Michel Barnier’s short-lived administration in December last year.
It is likely to rattle financial markets. Last week, France’s 30-year bond yields rose alongside borrowing costs in other major economies before retreating. On Monday morning, the yield on 30-year bonds in France was 4.35%, while the yield in 10 was 3.43%.
If Bailou’s administration falls, French President Emmanuel Macron must elect the fifth prime minister within two years. Macron has weathered France’s current crisis after the Snap Parliamentary election he called last year.
The vote was intended to be more clear on the balance of government power, but instead promoted more condemnation and division, along with political parties with parties that won each round of elections. These feelings of anger have become more ingrained as Macron has a centralist alliance in charge of unfortunate minority governments since the vote.
The rival party on the left (the new popular front alliance) and the right (national rally) say they do not support the Beyloo government after long-term discussions on the budget and proposals to cut spending, raise taxes and proposed freezes on public spending. Proposals to cut two public holidays in France have also dropped significantly.
Bayrou positioned Monday’s vote of trust as an existential moment for France, informing BFMTV last week that the situation was “significant and urgent.”
Jean-Claude Trichet, former governor of the Bank of France, told CNBC that Paris is facing “a combination of financial balance and difficult situations in terms of extremely difficult circumstances.”
“I understand that the Prime Minister wanted to put all political parties in front of responsibility. Unfortunately, for political reasons, the extreme right and left wing, including the Socialist Party, decided that it was not politically profitable to play the game of continuing Bayrou.”
“You can already think of Bayrou as not (the prime minister).”
Voting is scheduled to take place on Monday afternoon, with results expected after 5pm local time.
Arthur Delaporte, a Socialist MP who initially offered support for Bayrou but overturned his position, said his party could not support the “blind” trust vote and that the government proposed too many budget cuts.
“Too many cuts (Bayrou proposed) have been made to the public services, pensions and social benefits that are unacceptable. Today there is social anger towards the government, and this is important to take into account, Bayrou told CNBC’s Charlotte Reid on Monday.
What happens next?
Economists and geopolitical analysts consider Beyloux a defeat, but “the most interesting thing is the following,” the Deutsche Bank strategist said in an email comment Monday.
“President Macron is expected to nominate a new PM that can achieve a majority to pass the budget, which will likely require the support of central left-wing socialists, as right-wing populist national rallies seek to hold SNAP parliamentary elections.
Macron is likely to appoint Baillou’s successor as quickly as possible.
“At the beginning of last week, France’s financial situation was a truly pressing issue for the market, along with the sale of UK gold leaf, but the US Treasury rally caused this. Nevertheless, if global fees change again, both countries are in a state of uncertainty,” added Deutsche Bank.
Pascal Cagni, president of C4 Industries, told CNBC that political turmoil in France will not be comprehensively resolved until the new presidential election takes place in early 2027.
“The truth of the matter is that you have three (political) blocks, and none of them have an election (winning)… won’t solve that until the presidential election.”
“We have to learn how to work together…and we basically have agreements to serve and reform the country quickly,” Crani said.
