Bloomberg Audio Studios, podcasts, radio news. In France on Wednesday, President Emmanuel Macrone's government lost a no confidence vote. Politicians on the right and the left called for that vote and supported it after Prime Minister Michel Barnier pushed through a budget without parliamentary support. Crisis on the brink as France's government faces a vote of no confidence. Barnier has recently falls through a budget bill without a vote.
Is collapse now imminent for this French government? Well?
That no confidence vote effectively ended Barnier's short tenure as Prime minister. Barnier addressed the nation just before the vote, calling it an honor to have served with dignity France and its people. He'd been on the job for just under three months.
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La Today day, there are a lot of questions about the future, big ones about President Macron's prospects, what happens to his political party, and what's next for France.
No government has fallen to one of these motions of no confidence since nineteen sixty two.
Bloomberg Stephen Carroll has been in Paris to cover the vote and its fallout.
That time around, it was solved by calling early parliamentary elections. But this time around President Macron doesn't have that option because he already did it this year, vuding France into the political and potentially economic unknown.
I'm David Gura, and this is the big take from Bloomberg News today on the show Turbulence and Uncertainty in France. After the government was toppled. What led to the vote and what do we know about what comes next? Moments after the vote, I caught up with Bloomberg Stephen Carroll asked him to walk us through what happened. Get us up to speed here. What was the outcome of the vote?
Well, look, Michel Barnier has added an unhappy records to his long career. That is, he is the shortest serving prime minister in modern French political history, just two months and twenty nine days in office, as he was felled by a vote of no confidence in Parliament. Three hundred and thirty one deputies voted against him and needed two hundred and eighty eight for the motion to pass.
Stephen mark this moment for us, you're kind of nodding to the historic nature of this. What does it mean for the country moving forward?
It plunges France into a relative political unknown. I say relative because this has happened once before in nineteen sixty two, but the way out of that particular crisis was calling early legislative elections. Emmanuel Macron doesn't have that choice this time around because he did that last June, which means he can't call new ones until next July. So for the moment, it means that France has no government. There
will be caretaker ministers in place. Emmanuel Macron needs to find somebody new to take on the impossible check challenge as it now looks, of being Prime minister and trying to cobble together some sort of working majority or minority in Parliament, which on the mats looks very difficult. There isn't an easy constituencies to win over, so that means no policy making for the moment, no budget for twenty
twenty five. Once we go past the thirty first of December, we get into a special arrangement where essentially the French government keeps the lights on and works month to month, but that could potentially cause further concerns on markets, but also it could see them falling foul of the European Union it's already under watch for what the EU calls an excessive deficit procedure because its deficit is too high. Well that depthit's going to get even bigger.
Now, this of course was something of great popular interest, of interest to investors as well. I know you've been paying attention to that. What was the market reaction the run up to the vote and what have we seen since?
Well, look, in the days running up to it, there were a number of again unhappy records that we saw on French market. So the spread of borrowing costs between France and Germany widened to the most since twenty twelve, that was the height of the Eurozone crisis. And it's always the way that we think about debt in the euro Area. Germany is considered the safest bet. So the further away you are from Germany when it comes to
borrowing costs, essentially the worst perception that investors have in you. Now, our colleagues who are experts in the markets will also point out that France's ten year borrowing cost is still below three percent. It's two point nine percent or in and around there, and that still means that you know,
if you're going to get a mortgage in France. You're still going to get a pretty good rate on a fixed rate mortgage because French mortgages are fixed for the whole lifetime of around three percent, which looks pretty good if you're sitting in the UK or in the US. The other reaction that we've seen on markets has been in the Euro weakening further, but difficult to unpick exactly how much of that is around France because dollar strength has been such a theme of recent weeks as well.
We've got the euro hovering around one and you do have to look for some further sort of more outlandish calls for anyone who sees that going back to party, at least in the short term. The actual reaction once the vote happened a bit of a shrug from markets they'd seen it coming. We're not expecting any major moves on the back of that. We'll be watching French equities to see if French banks are put under further pressure.
Stephen, this vote came after a string of speeches. What did we hear in the run up to the vote? Who were the key players who's spoken? What did you take away from what they had? The same?
So we heard from the leader of the far left party in Parliament, Eric Correll, and also from Mamine le Pen from the far right. They were very keen to point to this being an unfair budget, a budget that was not what they wanted to see from a government and as they saw it hurting the French people. Lots of rhetoric and high rhetoric as you'd expect from French politicians when given this sort of pulpit, knowing well that
they had the numbers to topple Michel Bargnia. Michel Barnier himself had the chance to defend himself in Parliament before the vote was called, calling this a moment of truth and a moment of responsibility for the country.
Introduce us to Barnier. What's this background? Why did Macron choose him as Prime minister?
Michelle Barnier has been a fixture of French politics for some fifty years. It was the late seventies when he was first elected as an MP for the Utsavoir region where he's from and the veteran around the French Alps, and he's someone who's served as a minister in previous governments. He was a member of the center right Republicans party here in France. He went on to a career in the European Union as a European Commissioner and also the
EU's chief negotiator on Brexit. He was a bit of a surprise choice for Emmanuel Macron to bring in as Prime Minister. They're not from the same political family, but in Michel Barnier, he was looking for somebody who was perhaps not in the fray of day to day politics, someone who might be able to bring together forces that weren't traditionally inclined to support Emmanuel Macron's group in Parliament,
and also leaning in to his legendary negotiation skills. We learned this during Brexit that he was an extremely astute negotiator. He used the phrase so often during the Brexit negotiations that time is ticking, and really time was ticking from Michelle Barnier from the moment that he took up this job in September. He felt he'd achieved the best compromise possible, but didn't have the numbers to vote it through, and that's what's led us to this no confidence vote.
In his speech, Michelle Barnier said he was sure that the no confidence vote would quote make everything more severe and harder coming up, the fiscal and political problems France is facing and what's likely to happen next. France's government has lost a no confidence vote, the first one in decades. I called up Bloomberg Stephen Carroll and asked him to explain how we got here and what this outcome means.
What kicked all this off was that decision by Prime Minister Michelle Barnier to push through a budget for twenty twenty five without parliamentary support. That is what led to Wednesday's vote. What made this budget, the budget Michelle Barnier pushed through parliament so unpopular, so.
It wasn't an easy task to begin with. There were lots of individually unpopular measures in this to do with the reimbursement of medical costs provided by the state. Currently, and most controversially, was this idea of pensions. In France, state pensions go up every year in line with inflation, and one of the things Michelle Barnier tried to do to save money was delay that increase for pensioners that would have been due to come into force from the
first of January until later in the year. Essentially just trying to save a bit of money by implementing that increase a bit later on, and that was one of the red lines that Marie Lapenn had in her negotiations with Michelle Barnier running up to this particular crisis point, and that's proved to be one of the most controversial measures that he was trying to pass.
On the heels of this no confidence vote, President Macron can't call for another special election until next summer. What is likely to happen next here there.
Are a couple of deadlines that we have to worry about. One of them is that the budget needs to be
passed by the end of the year. Now, there isn't a US style government shutdown on the cards for France, but it does enter relatively untested territory where there is an emergency provision which allows taxes to be collected, minimum services to be provided, welfare benefits to be paid, for example, but will make things very difficult in the running of the country because it's essentially just maintaining the nature and the business of the state without being able to make
any strategic decisions.
Stephen says the outcome of the no confidence vote has also raised questions about what's next for the far right leader Marine la Penn and the National Rally party.
She's been building her political capital in France, you know, for more than ten years, essentially trying to make a bid for the presidency. She came pretty close last time around. Now, Emmanuel Macroon's term runs until twenty twenty seven. He's shown no signs that he will resign early. Marie Leapen herself is facing a court decision that's due to come in March of next year, which could see her barred from running in future elections.
Lapen and National Rally have been accused of embezzlement, of misappropriating funds from the European Union. She denies all wrongdoing, but prosecutors have asked a judge to ban Leapen from holding public office for five years.
That's something that could be preying on her mind, is if she's trying to force Emmanuel Macron to call an early presidential election, something that he can still do. Looks very unlikely at this point, but that's one theory that's being bandied around by French political commentators that perhaps Marie Lapenne has decided to cash in the chips of her political capital and try and force Emmanuel Macron into an impossible situation, Steven, As you.
Say, Macron is resisting any calls to resign early. What does this mean for him and for his party?
It puts them in a very difficult position. There are a number of figures who are lining up to try and replace Emmanuel Macron as the presidential candidate for his party in twenty twenty seven, because he'll have served his maximum number of terms as president, but it's very difficult to see who their constituency will be by that time. This budget crisis has reminded voters and politicians that there are other parties out there. There are other political forces
at play, and for now they look more powerful. So how a government can proceed between now and twenty twenty seven is very unclear. What can they do? What compromises would that government have to make with Mary Lapenn's party or with the left wing parties to try and pass a budget and continuing even minimum functioning.
One possibility, Stephen says is that the next prime minister could choose to build an alliance with the Socialist Party.
They picked up a lot of seats in the last election and they represent one of the biggest parts of this left wing alliance. The difficulty will be trying to convince them to separate themselves from the hard left parties and potentially sign their own political death sentence by going into power with the Centrists and the center right. There'll be many people in that party who would be wary of this as an option, but looking at the numbers, really it does seem like the most likely option if
you were to try and build a coalition. Of course, plenty of convincing to be done there. But even in the rhetoric that we heard from lawmakers from Macron's party in the days running up to this no confidence vote, they mention over and over again the stalwart reputation of the Socialist Party in French politics and their long history of government. They're trying to appeal to them to peel away from that left wing alliance and join into something
that could form a functional government. For the moment, that's the only option that looks possible without some major political shifts from the parties involved.
We've talked about what this means for politicians and political parties, how about for the country itself.
People in France are worried about, like everywhere else, the cost of living and public services. There's very little hope out there that this impasse, however it is resolved, will actually lead to people's needs being addressed, their wants being addressed by the next government. It's very difficult to try and see how someone, any political figure could inspire the sort of hope that Emmanuel Macron did when he arrived, you know, into the presidential race late in twenty seventeen.
That sort of uniting figure hasn't been found really by any party in recent elections. Marie Lapenn has a large constituency on the right, Jean Luke Manlauchamp has a large constituency on the far left, but neither have been quite big enough to either break through and make it to the presidentency or to be able to form a sufficient number of alliances in Parliament to become a prime minister. This leads to an interesting question about who will own
the center by the end of this political cycle. There are plenty of players out there, but there's still a lot of questions about how anyone can win over and address the concerns that French people have about their future in a more uncertain world.
This is the big take from Bloomberg News. I'm David Gura. This episode was produced by David Fox. It was edited by Tracy Sanielson and Ergol O'Brien. It was fact checked by Adriana Tapia and mixed and sound designed by Alex Sagura. Our senior producer is Naomi Shaven. Our senior editor is Elizabeth Ponso. Our executive producer is Nicole Beemster. Bor Sage Bauman is Bloomberg's head of podcasts. If you like this episode, make sure to subscribe and review The Big Take wherever
you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow.
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