French Premier Warns of Market ‘Storm’ If Budget Voted Down

French Prime Minister Michel Barnier said the country faces “storm” in financial markets if an “unlikely but possible” alliance of lawmakers across the political spectrum rejects his government’s budget proposals and votes it out of power.

“There will probably be a rather serious storm and serious turbulences in financial markets” in case of a no-confidence vote, Barnier said in an interview with French TV channel TF1. “If the government falls, emergency measures will be taken,” which won’t cover full-year expenses.

The French government risks facing higher borrowing costs as its lack of a majority in Parliament makes it harder to implement spending curbs and tax hikes needed to curb a ballooning budget deficit. A measure of French bond risk on Tuesday, for instance, rose to levels last seen during the euro area debt crisis a dozen years ago. 

The premier’s political survival hangs on whether French far-right leader Marine Le Pen’s will back a potential no-confidence vote when he presents final versions of the 2025 government and social-security budget bills in coming days and weeks. Le Pen has vowed to bring down his administration if her demands to better protect household purchasing power aren’t met. 

Barnier went on TV Tuesday night after his boss, President Emmanuel Macron, reportedly said he believed that Le Pen would carry out her threats, and that Barnier would soon be out. Macron’s office denied he made such comments.

The French prime minister, however, signaled that he has no plan to resign. He said he’ll probably have to use a constitutional provision known as 49.3 to bypass a parliamentary vote and adopt next year’s budget, as his government lacks a majority in the lower house. 

But using the tool could lead to a no-confidence vote, which would need the backing of both the far right and the left-wing alliance New Popular Front to succeed. While political opposites, both groups have criticized Barnier’s budget proposals.

Le Pen has focused her ire on the government’s plan to increase taxes on electricity, to lower reimbursements for medicine, and to postpone the indexation of pensions to inflation. She has also demanded additional measures on immigration. 

In a bid to assuage Le Pen’s party, Barnier said Tuesday that electricity prices will fall by 9% next year, “and we’ll see if we can do more to preserve the purchasing power of the French.” 

The French premier also repeated he’s ready to “improve” the budget bill, but is sticking to his aim to lower the deficit to “about” 5% of GDP next year, compared with 6.2% expected in 2024. On Tuesday, the European Commission called his plan “realistic and credible.” 

Barnier also said in the interview that measures to support farmers would be stopped if his government is voted out. He added he plans to appoint a political science professor to study a potential overhaul of the legislative election system, something that has been demanded by several parties, including the Le Pen’s National Rally.

Le Pen has recently hardened her tone, threatening to topple the government while playing down the negative consequences of a no-confidence vote. In an op-ed in French daily Le Figaro on Tuesday, Le Pen said that even if Barnier’s government was booted out, emergency laws would allow the parliament to extend the 2024 budget and avert a US-style government shutdown. 

The head of the National Assembly. Yael Braun-Pivet, who belongs to Macron’s party, also said that there was no such risk.

The path to installing a new government remains unclear. It took months for Macron to appoint a prime minister this summer after losing his majority in the French parliament earlier in the year.

Emergency measures that could be taken by an interim government would prevent “neither a crisis, nor the mistrust of financial markets,” Barnier said. There could be a new budget bill, “but we don’t have time to lose.”

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