French PM takes confidence vote gamble over budget woes
French Prime Minister Francois Bayrou speaks at a press conference in Paris on August 25, 2025.
Dimitar Dilkoff | AFP | Getty Images
On Tuesday, France’s minority government faced the possibility of collapse over weeks after the opposition parties said they would not support Prime Minister Francois Bayrou in the 8 September confidence game of the budget deduction plans.
Paris CAC 40 The index was 2% lower in early agreements on Tuesday. French Middle to Middle to long -term borrowing costs, the country 10 -year bond return 2 basis points and it 30 -year yield 4 basis points.
France’s need to lower the public deficit is a long -standing and extremely controversial issue. Last year, forcing the 2025 budget without parliamentary approval led to the collapse of the previous minority government led by Michel Barnier. Political volatility has increased in France, as the majority of the July 2024 parliamentary elections could not deliver the majority of any party or coalition.
Bayrou is currently trying to exceed the 2026 budget, which includes approximately 44 billion euros ($ 51.2 billion) financial tightening, with suggestions such as freezing welfare and retirement expenditures and tax brackets at 2025 levels. He also suggested that two public holidays be cut with a non -popular movement.
The government argues that there is a need for interruptions to domesticate a gap in total 5.8% of Gross Domestic Product In 2024 – a figure said that he would continue to rise in inertia. The European Union says that its members should target an open rate of 3% to reduce excessive debt.
French economic growth, by the way, stagnated Cooling up to 1.2% in 2024 1.4% of the previous year.
Speaking to the press on Monday, Bayou said France’s dependence on debt has become “chronic”.
According to the CNBC translation, “Our country is in danger, because we are under the risk of excessive borrowing,” he said.
Bayrou said that the French debt has grown 2 trillion euros in the last twenty years and the country’s 2008 global financial crisis, COVİD-19 PANDEM, Russian-Ukraine War, Inflation increase and recently influence of US tariffs. Authorized, budget dispute, “street conflicts and insults” instead of a regular discussion in Parliament and then a vote should be solved, he added.
The over -right national rally, the comments of the Greens and Socialists officials suggested that no party would officially support it and would not risk the collapse of the government.
Socialist Party Secretary General Pierre Jouvet said on Monday that the group will vote against Bayou on the X Social Media platform on Monday and that the government did not trust the Parliament or French people. Jouvet added that the party will offer its own budget offers in the coming days.
National Rally President Jordan Bardella in question According to a CNBC translation, his party “elections will never give confidence to a government that suffers from the French people”.
Risk of collapse ‘not priced’
“If the government loses the voting of confidence in the Tuesday, Deutsche Bank analysts may try to nominate a different prime minister to establish a government, which will face the difficulty of exceeding the 2026 budget,” Deutsche Bank will try to nominate a government. He said.
“Alternatively, Macron can search for Snap selections. Existing surveys point to another disintegrated result as after the 2024 summer vote, but on the extreme right [National Rally] Investors who pioneered the surveys would pay attention to whether they could clearly turn this clue into a majority this time. “
Following the Monday news, the spread of France to the 10-year bond return has fell 9.8 basis points, the lowest level since 1999, and said that analysts-investigators put a premium similar to the political risk of countries. In 2022, the spread was as high as 180 basis points.
Reinout de Bock, President of the UBS European Prices Strategy Strategy, said CNBC’s “European Early Edition” on Tuesday, the call for a vote of confidence in Bayrou was a “surprise” to the markets.
“I think it’s not priced at all, and in the next few weeks it is a potentially big story,” he said.
“Currently in Europe, it is really about spending more than 10-15 years ago … Difficulty for France is that they have a budget deficit [of] About 5.8% of GDP. This is the biggest budget deficit in the euro zone and there [are] Open questions about the extent to which they will be successful in reducing expenditures. “
The Bayrou may stick
Erik Nelson, President of the G10 FX Strategy in Wells Fargo, called the appearance of French assets “not big” – but the result of Bayrou’s government was not an unpredictable result.
“I think some of the problem here is that European stocks are a very popular momentum trade of the Euro itself. What we see in the last few days, some of the acceleration processes of the employee relaxation, so there is a risk of relaxing some of these political risks.”
“I don’t know that Bayrou is absolutely outside. There is still uncertainty.
He said that the French Prime Minister had already planned to remove some public holidays and could now return.
“Of course it will be removed from this table. So this is not an agreement, but a very thin line is walking here, and as I mentioned earlier, there is a lot of risk in European assets.” He said.
