French Government in Crisis as Prime Minister is Voted Out Amid Austerity Budget

Strategic Insights -

French President Emmanuel Macron's government teeters on the edge of collapse after the national assembly voted out Prime Minister François Bayrou, who unveiled unpopular austerity measures to cut €44 billion in costs over three years. Bayrou's dismissal marks the fifth prime minister to be ousted in two years, and Macron will be forced to appoint a new prime minister within days to counter demands for his resignation and national elections. The French economy has slowed over the past four years, with government spending increasing and federal debt on track to reach nearly 120 per cent of GDP next year.

Key Takeaways:

  • The French national assembly has dismissed five prime ministers in two years, with no clear majority to restore stability and prevent further upheaval.
  • President Emmanuel Macron will be forced to appoint a new prime minister within days to counter demands for his resignation and national elections.
  • The austerity budget, aimed at cutting €44 billion in costs over three years, is highly unpopular and has sparked protests across the country.
  • The far-right National Rally, led by Marine Le Pen, has a strong position in the polls despite her conviction for embezzlement and eligibility ban until 2027.
  • The Ensemble coalition, loyal to Macron, holds only 91 seats in the National Assembly, while the National Rally and its allied parties hold 138 seats.
  • The French economy has slowed over the past four years, with government spending increasing and federal debt on track to reach nearly 120 per cent of GDP next year.
  • The major French share market index, the CAC 40, has fallen about 6 per cent since February, despite the current turmoil.
  • Prime Minister Bayrou's dismissal is a sign that Macron has failed to break the impasse in parliament, despite his efforts to call a parliamentary election last year to halt the rise of Le Pen.

Statistics:

  • Capital Economics estimates Australian government debt at 55 per cent of GDP.
  • The OECD reports that Japan's debt is 228 per cent of GDP and Greece's debt is 180 per cent of GDP.
  • France's federal debt is on track to reach 120 per cent of GDP next year, with government spending increasing significantly over the past four years.
  • The austerity budget aims to cut €44 billion in costs over three years, with a target of reducing the budget deficit from 5.8 per cent of GDP in 2022 to 4.6 per cent in 2023.

Sources:

  • The Australian, "French Government in Crisis as Prime Minister Voted Out Amid Austerity Budget"
  • OECD figures
  • The Australian, "Capital Economics estimates Australian government debt at 55 per cent of GDP"
  • The Australian, "Macron's ally, Prime Minister François Bayrou, insisted he was right to unveil laws to scrap two public holidays"