French Premier Survives No-Confidence Vote, Securing New Budget

Yahoo

05-02-2025

(Bloomberg) -- French Prime Minister Francois Bayrou survived a no-confidence motion on Wednesday, assuring the adoption of a 2025 budget following months of political turmoil.
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Bayrou used a special constitutional provision on Monday to force the budget through parliament without a vote, triggering the no-confidence motion. The vote had little chance of success after the Socialists — breaking with their left-wing alliance — said they wouldn't support it.
France is on its third government since President Emmanuel Macron called snap elections last summer that fractured the National Assembly into three roughly equal and opposing blocs. Lawmakers toppled the previous prime minister, Michel Barnier, after he tried to force through a budget using the same provision.
French bonds rallied this week with the yield premium investors demand to hold the country's 10-year bonds over less risky German obligations narrowing to 71 basis points.
'We have an imperfect budget,' Bayrou told lawmakers ahead of the vote. 'It's an emergency step because this country cannot live without a budget.'
Bayrou has now largely completed his two most pressing missions: adopting a budget and breaking the unity of the leftist New Popular Front alliance. The collective, which makes up the biggest single group in the lower house, is now split between the far-left France Unbowed, which filed the no-confidence motion with other left-wing allies, and the Socialists.
Bayrou will still likely struggle to adopt new legislation in the coming months given the fragmented parliament and the diminished power of Macron's coalition. The premier could also face additional no-confidence motions, and the Socialists have said they will file one over Bayrou's aggressive statements on migration reform — but it's unlikely that motion will garner sufficient support.
The new budget includes concessions to the Socialists that were agreed to on Friday by a cross-party group of lawmakers, such as preserving spending for healthcare and education.
The new legislation contains a smaller adjustment than the one sought by Barnier, with around €52 billion ($54.2 billion) of savings to get a deficit of 5.4% next year. The rejected plan pushed by Barnier included €60 billion of tax increases and spending cuts.
France is out of compliance with European Union rules that require member states' debt to be below 60% of GDP and a deficit under 3%.
In December, Moody's Ratings cut France's credit grade in an unscheduled change, warning that the country's finances will be weakened over the coming years and that there is a 'low probability' that the next government will be able to sustainably reduce the size of fiscal deficits beyond next year.
The vote means that France won't be relying anymore on emergency legislation adopted to avoid a shutdown.
(Updates with Bayrou comment in the fifth paragraph, context throughout.)
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