French Prime Minister Michel Barnier faces a Monday deadline set by far-right leader Marine Le Pen to meet her demands on the 2025 budget, or risk the collapse of his government, Bloomberg reports.
Le Pen’s National Rally party, holding significant leverage in France’s fragmented parliament, is demanding major changes to Barnier’s €60 billion ($63.5 billion) fiscal adjustment plan.
Key demands include scrapping proposed cuts to drug reimbursements, a moratorium on new or increased taxes for most individuals, indexing pensions to inflation from January 1, and stricter policies on migration and crime. While Barnier yielded to one key demand – abandoning a planned electricity tax increase – Le Pen remains unyielding on the remaining issues.
The concession on electricity taxes, which will result in a 14% price decrease from February (up from the previously planned 9%), was hailed as a “victory” by National Rally President Jordan Bardella. However, he stressed that further concessions are necessary, emphasizing the need to improve competitiveness for small and medium-sized enterprises.
Le Pen, in an interview with Le Monde, reiterated her intention to vote for a no-confidence motion if the government utilizes Article 49.3 of the Constitution to force the passage of the social security financing bill. This threat, along with the left’s own pledge to table a no-confidence motion should the social security portion pass, creates a real possibility of the government falling by mid-week.
The political uncertainty has already impacted financial markets. Investors have been selling French assets, widening the yield spread between French and German 10-year bonds – a key indicator of risk. While Thursday saw a four-basis-point drop in this spread, its largest decline since July, the overall trend remains upward since President Emmanuel Macron’s snap election in June. The spread currently sits at 82 basis points, significantly higher than the sub-50 basis points seen before the election.
