Financial markets in France are under pressure from political instability following Prime Minister Francois Bayrou's announcement of a confidence vote on his budget plan.
Bayrou and His Budget Proposals
Prime Minister Francois Bayrou proposed a new fiscal plan which includes €44 billion in spending cuts. This move follows a projected budget deficit of 5.8% of GDP in 2024. Bayrou aims to freeze welfare spending and tax brackets at 2025 levels, and he also plans to eliminate two public holidays.
Opposition Against Bayrou
Opposition parties, including the Socialists and Greens, have already stated they will not support the confidence vote. Pierre Jouvet from the Socialist Party claims the government lacks legitimacy and intends to propose their own budget. National Rally leader Jordan Bardella stated, 'We will never vote confidence in a government whose choices make the French people suffer.'
Markets Brace for Fallout
Markets interpreted Bayrou's situation as unreliable. UBS analyst Reinout de Bock noted that the news of the confidence vote was a surprise that could have significant consequences in the coming weeks. The yield spread between Italian and French bonds dropped to 9.8 basis points, indicating increasing political uncertainty in both countries.
Political instability in France leaves little room for successful budget passage. If Bayrou fails the confidence vote, the country may face new elections and deepening crisis.
