Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
French Prime Minister Michel Barnier’s government will face a no-confidence vote in coming days after he moved to force through draft budget measures without parliamentary approval.
Barnier activated article 49.3 of the French constitution on Monday to push through the first part of his €60bn proposed fiscal package of tax rises and spending cuts. He lacks a majority in the National Assembly.
Marine Le Pen’s far-right opposition party Rassemblement National said on X immediately after the move that it would “vote to censure the government”.
The far-left France Unbowed party also confirmed that it would file a no-confidence motion in the coming hours.
Barnier defended his decision and called on French lawmakers not to plunge the country into crisis.
“We have arrived at a moment of truth . . . it is now up to members of the parliament to decide if our country gets a responsible, indispensable budget or if we step into uncharted territory,” he said.
“I have gone to the end of the dialogue that was possible with all political groups, staying always open and listening.”
The brinkmanship over the budget measures has roiled French markets in recent weeks, briefly pushing Paris’s borrowing costs above Greece’s and denting France’s stock market.
French stocks fell slightly on Monday as investors reacted negatively to the heightened political risks, while the euro continued to weaken, down 1 per cent at $1.047.
The country’s sovereign bonds weakened following Barnier’s decision to trigger the constitutional clause, taking the 10-year yield up 0.02 percentage points to 2.92 per cent, while other Eurozone bonds rallied.
The spread with Germany’s 10-year benchmark bond, a key measure of risk, reached 0.88 per cent, close to last week’s 12-year high.
If Barnier’s government is voted down this week, it would be only the second time French lawmakers have taken such a step since the Fifth Republic was established in 1958. It would also make Barnier the shortest-serving prime minister during the same period.
Barnier had been locked on Monday in last-ditch negotiations over the fiscal package with Le Pen’s party. But they have so far proved fruitless, despite Banier conceding on two out of three of RN’s demands.
Read the full article here