France President Emmanuel Macron welcomes the President of the European Commission, Ursula von der Lyen, upon its arrival at the summit at the Elzi Palace, in Paris, on March 27, 2025.
Ludovic Marin | AFP | Gety pictures
Tensions are likely to be high in Brussels this week, as the other political collapse in France leaves the financial unification that is needed in the country, suspended in balance.
The second largest economy in the eurozone has broken the rules of the European Commission over the budget deficit and debt boundaries, and the consecutive presidents who tried to fix the problem with the proposed reforms, spending discounts and tax height He was expelled over and over again.
The last martyr in the state of continuous political stalemate in Paris – the fifth of the Prime Minister in France in less than two years – is Sebastian Lecorno, who announced his resignation on Monday after only 27 days in his position.
His decision came to step down after his failure to obtain political competitors (And even the allies on the right of the center) To support his new government. Not even announced any plans for spending or taxes 2026 yet, although encouraging the budget between the government and the competing parties was declining previous administrations.
This indicates that he is desperate to avoid the loss of another prime minister. France, Emmanuel Macron, gave Monday evening to 48 hours to devise a plan for “stability for the country” and a way through political stalemate.
Licoreno wrote to X that he would report to the president on Wednesday evening on any possible breakthrough “so that he can extract all the necessary conclusions.”
On Wednesday morning, Lecorno said that the possibility of resolving Parliament as a result of the crisis appears to be “more dimension” after a day of talks with various political parties, noting that there is preparedness to obtain the 2026 budget before the end of the year.
Whether the dangerous cooperation between the competing parties is still seen, with those who follow the maximum right and right scent earlier this week, calling for Macron’s resignation and parliamentary elections and/or the new presidential.
Leave the financial rules broken
Brussels officials are unlikely to appear in local political affairs, but pressure on Paris to start some dangerous financial unification – quickly.
France needs to close the budget deficit by 5.8 % of GDP in 2024, and treat a large debt pile of 113 % of GDP last year. This is France’s position behind Greece only and Italy in terms of The largest piles of debt in the European Union.
Both levels are much higher than the rules of the European Union require that the impotence of individual members is not exceeding 3 % of the gross domestic product, while their general debts should not exceed 60 % of economic production.
France was placed under European Union “Excessive deficit,” It is applied to member states that do not meet the rules stipulated in the “Stability and Growth Convention.”“
She has even 2029 to get her home in orderBut there is no sign that France will be able to fulfill its obligations any time soon.
CNBC asked the European Commission to comment on the latest crisis and awaiting a response.
“The question is how do you adhere to these rules (EU),” Antonio Flat, professor of economics at Insead, told CNBC on Tuesday. “At the present time, the deficit in France clearly goes beyond the rules, and it is unclear whether France’s budget will make you among the bases in a short period of time, which is required by the rules.”
“Given the formation of Parliament, given the fragmentation, given the views of the extreme right and the extreme left, this means that it seems very difficult to achieve a budget that lives through these rules,” he said.
Although the European Union may be ready to kick the can on the road at the present time, investors may not be ready to overlook France’s lack of financial discipline. The country has already suffered from cutting the classification by Fitch last month, With MOODYS widely to follow her example at the end of October.
Required, quickly
If Lecornu’s efforts fail over the next few hours, Macron will face the choice of a new PM appointment, the dissolution of Parliament and contact with fresh parliamentary elections, or resignation. Macron is currently not clear, although the last resignation option is very unlikely.
In any scenario, economists say it is unlikely that there is significant progress in reducing the country’s deficit or debt pile, while as well as slowing growth. In addition, the 2025 budget is likely to be offered next year.
“Whatever scenarios, we will not have a suitable budget by the end of the year,” said Hadrian Kamat, the chief economist in France, Belgium and the euro area in Natxis on Tuesday.
“In terms of financial monotheism at this stage, we do not see any very positive scenarios, which means that the deficit is likely to remain close to the current level of the level of 5.4-5.5 % for this year, and perhaps for the next year, depending on the budget and total data,” said EUROPE EARITION ETITION in CNBC.
Goldman Sachs also said on Tuesday that the “budget slide” probably in France led the bank to raise the forecasts of the 2025 budget deficit to 5.5 % of GDP.
Visitors from rain resort to Parvis Des Droits de l’homme on Esplanade du Tocadero opposite the Eiffel Tower, where the remains of Hurricane Kirk caused heavy rains over Paris, on October 9, 2024.
Ludovic Marin | AFP | Gety pictures
“Firstly, we still expect growth to grow without direction … second, we still expect to see little progress in reducing government deficit,” we still expect that France will start next year with a frozen budget (or at least partial). “
“However, deep political differences, slower growth and increased borrowing costs from significant progress, and we raise our impotence for 2026 by 0.1 percent to 5.3 % of GDP,” they noticed. Goldman also reduced its growth forecast for 2026 for France, expecting dull expansion by 0.8 % next year.
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