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French Prime Minister Michel Barnier’s government will face a no-confidence vote as early as Wednesday after he moved to force through draft budget measures without parliamentary approval.
Barnier activated article 49.3 of the French constitution on Monday to try 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.
Shortly after the move, Marine Le Pen vowed that her Rassemblement National party would vote to remove the prime minister, raising the spectre that Barnier’s government could collapse.
The far-left France Unbowed party also confirmed that it would file a no-confidence motion in the coming hours.
Le Pen slammed Barnier for not listening to her party’s demands to protect French citizens from social security measures that she said would erode their purchasing power.
“The French have had enough,” she said. “Maybe they thought with Michel Barnier things would get better, but they were even worse.”
The 49.3 clause allows the government to bypass parliament to pass a law, but only if it can survive a no-confidence vote.
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.
“Investors are worried that France will be rudderless should the government fall in [a] no-confidence vote,” said Chris Turner, global head of markets at ING. He added that the dynamic was “adding to the Eurozone malaise”.
The country’s sovereign bonds weakened following Barnier’s move, taking the 10-year yield up 0.02 percentage points to 2.91 per cent, while other Eurozone bonds rallied.
The spread with Germany’s 10-year benchmark bond, a key measure of risk, reached 0.87 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. The budget’s fate and that of Barnier’s administration remained largely in the hands of Le Pen’s RN since it is the biggest single party and a key swing voting bloc in the assembly.
But the talks proved fruitless, despite Banier conceding on two out of three of RN’s demands.
“It’s basically game over for Barnier,” said Mujtaba Rahman of Eurasia Group. “France is about to enter its second serious crisis in five months.”
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