France’s political landscape is in flux as the Socialist Party signals a potential agreement with Prime Minister Francois Bayrou that could avert a government collapse, Bloomberg reports.
The proposed deal hinges on concessions regarding a controversial pension reform in exchange for the Socialists’ support in parliament.
Socialist Party leader Olivier Faure revealed that progress has been made after a meeting with Prime Minister Bayrou. While the initial meeting was unproductive, subsequent phone discussions have led to a possible breakthrough, Faure stated in a BFM TV interview.
Under the proposed deal, the Socialists would agree not to support no-confidence motions, which could topple the current government. In return, Bayrou would suspend implementation of President Emmanuel Macron’s contentious retirement reform. However, the Prime Minister’s office has indicated that a full suspension is unlikely. Instead, Bayrou intends to revisit the legislation after consultations with union and employer representatives over the next four to five months, as reported by Le Parisien.
Bayrou’s government, a coalition of centrist and conservative members, lacks a parliamentary majority. His appointment last month came after his predecessor, Michel Barnier, was ousted following a successful no-confidence vote led by opposition parties from the left and far-right. Bayrou has been actively seeking support from Socialists and other left-leaning groups to secure abstentions on future no-confidence motions.
The specific proposal made by the Socialists remains undisclosed, but Faure emphasized that the decision now rests with Bayrou.
The political uncertainty has had an impact on French financial markets. The country’s 10-year yield premium over Germany, a key risk indicator, fell slightly to 83 basis points on Tuesday. While this represents a decrease from a recent peak of 90, the spread is still significantly higher than it was in the first half of last year, when it sat at around half that value.
Meanwhile, the far-left France Unbowed party, led by Jean-Luc Melenchon, has already pledged to file a no-confidence motion following Bayrou’s scheduled policy speech at the National Assembly. Melenchon has criticized the Socialists and other groups for engaging in discussions with the government.
Bayrou’s address will primarily focus on the nation’s precarious financial situation. France currently operates without a full annual budget, relying on emergency measures to avoid a state shutdown. Finance Minister Eric Lombard has outlined a target of €50 billion in savings to reduce the budget deficit from 6.1% last year to between 5% and 5.5% for 2025.
The potential suspension of the pension law complicates matters, as it would make the 2025 budget calculations even more difficult. According to Labor Minister Astrid Panosyan-Bouvet, canceling previous pension reforms, as opposition parties have demanded, would cost an additional €3 billion next year and nearly €15 billion by 2030. Additionally, a suspension could alienate center-right lawmakers who oppose the move. Laurent Wauquiez, leader of the conservative Republicans party, warned against a suspension, calling it a “leap into the abyss without a parachute.”
