For several days, the government has been warning of a censorship by Michel Barnier’s government in December. “There will probably be a pretty serious storm,” the Prime Minister himself threatened on TF1 this Tuesday afternoon.
Same story for Maud Bregeon, the government spokesperson, who worries that France is being “sent against the wall.” Dramatization or real concern: what would happen if the Barnier government’s budget was rejected?
The consequences for the 2025 budget and political life
The executive’s first concern: the future of the state budget for next year. The text should return to the National Assembly on December 18. At that moment, Michel Barnier should “probably” activate the cartridge of 49.3, an article of the Constitution that allows a text to be adopted without a vote.
A motion of no confidence should then be tabled immediately before being debated, probably on December 20. Adding the votes of the National Rally and the left, there are 320 deputies who can overthrow the government, much more than the 289 votes necessary.
De facto, France would subsequently be left without a budget. This would be the first time since the beginning of the Fifth Republic. To remedy this, there are several hypotheses on the table.
• First option: voting on a “special law”
The resigning government will have to manage current affairs, as Gabriel Attal’s did this summer. He could then ask the Senate and Assembly to pass a special finance law.
Article 45 of the organic law relating to finance laws allows the government to “urgently request authorization from Parliament to collect taxes”. This provision also allows “credits by decree within the limit of the previous year’s amount for services considered essential and that allow the functioning of the State.”
Specifically, the different items of the state budget would receive funds to allow, for example, the payment of civil servants’ salaries.
Last year’s budget would also be renewed to the nearest euro and could not create new taxes.. Therefore, several provisions desired by Michel Barnier emerge, such as taxation of the richest or the increase in taxes on electricity.
It will then instruct Parliament to reach a new agreement on the 2025 budget. Meanwhile, the special finance law would divide the budget into 12 installments, one per month. This device was used for years under the Third Republic.
Let us, therefore, get out of the risk of “closure”, which refers to a situation of budgetary blockade that prevents the functioning of the administrations and the payment of civil servants in the United States, and that some in Macronía use.
• Second option: the use of article 47 of the Constitution
Another possibility for the resigning government: rely on article 47 of the Constitution. This provision allows the budget to be approved by ordinance if Parliament has not decided it within 70 days.. This deadline corresponds to December 21 at midnight for the State budget.
Problem: Michel Barnier has every chance of being overthrown on December 20. Can a resigned Government, in this scenario, make use of these orders from the Council of Ministers? The issue divides constitutionalists, since the situation has never arisen before.
The consequences on France’s financial situation
In addition to the political aspect, other more financial issues arise. How would the markets, through which France finances its debt, receive the overthrow of Barnier’s government? Would they be tempted to raise interest rates, automatically widening the deficit, which already exceeds 6%?
• First option: risk of rising interest rates on French debt
The Prime Minister expressed concern about the financial situation. “There would probably be serious turbulence in the financial markets,” said Michel Barnier on Tuesday afternoon on TF1.
In the event of government censorship and immediate absence of a 2025 budget, Such a scenario “would not lead France to bankruptcy, but it would lead to an increase in the interest rates with which the country finances itself in the markets.”judge Sylvain Bersinger, Asteres economist.
There are already signs: the difference between the interest rates on the ten-year benchmark loan between France and Germany has reached its highest level since 2012 – suggesting that Paris could, in the long term, struggle to get markets to buy its debt.
However, the observation still needs to be put into perspective: in 2012, Germany borrowed at interest rates among the lowest in its history, mechanically increasing the gap with France. The real question is rather which rates would increase slightly or suddenly.
“No one can anticipate the market reaction. It is enough for certain large investors to worry about what is happening (…) for them to disengage and take with them a good part of the market,” analyzes Gilbert Cet, professor of economics at the University. Neoma Business School.
• Second option: France would stop paying
Goalkeeper Maud Bregeon, for her part, spoke of the risk of a “Greek-style scenario.” In 2008, Athens was forced to turn to the IMF and the European Union, after the increase in market rates for financing, pushing it to the brink of default.
The situation between Greece in 2008 and France in 2024, however, has nothing to do with this. Athens faces difficulties in raising taxes, the accounts are disguised and the country’s place on the European scene is not the same.
In comparison, Greece had a deficit of more than 13% in 2008, compared to 6.1% by 2024 in France.
France also continues to finance itself without the slightest difficulty in the markets, and French debt remains a safe bet for investors. Especially because banking institutions believe that the European Central Bank would intervene in the event of a serious crisis.
As proof: despite the political crisis last summer, following the dissolution desired by Emmanuel Macron and the resigned government of Gabriel Attal, the “quality of its debt”, that is, the chances that investors will still be repaid, remains being one of the best. .
The French debt rating has certainly suffered a downgrade last July by the agency Standard&Poor’s, While France is in the midst of a political crisis, its ability to meet its debt maturities remains “very strong,” the rating agency’s criteria stressed.
Source: BFM TV
