The potential collapse of the French government and subsequent shift in fiscal policy is raising concerns about the economic stability of Europe, according to Clemens Fuest, head of the Ifo Institute in Munich.
Speaking to the Funke-Mediengruppe newspapers, Fuest warned that a parliamentary vote of no confidence in Prime Minister François Bayrou and the likely abandonment of his austerity measures, would significantly increase uncertainty surrounding France’s future fiscal direction. He cautioned this could push the nation toward a serious crisis in its public finances. Given France’s significant role within the European Union and the Eurozone, this instability would likely exacerbate the already weak economic development across Europe.
Fuest underscored that the situation in France highlights weaknesses within the European stability rules, which have proven inadequate in preventing individual member states from accumulating unsustainable levels of debt. He characterized France’s current predicament not as the result of a sudden crisis, but as a consequence of years of steadily increasing state debt.
Prime Minister Bayrou is currently attempting to secure backing for his proposed €44 billion in savings measures in a parliamentary confidence vote scheduled for this afternoon. However, projections suggest that he is likely to face a loss of confidence, triggering his resignation.
Since the 2024 parliamentary elections, President Emmanuel Macron’s party has lacked a ruling majority in the National Assembly. Bayrou has held office for just under nine months; his conservative predecessor, Michel Barnier, served for only three. France’s public finances are under considerable strain, with a budget deficit reaching 5.8 percent – almost double the permitted level. National debt currently stands at 114 percent of the nation’s economic output. The country faces an outstanding debt of approximately €3.3 trillion to creditors, surpassing any other Eurozone member.