BREAKING: France's government collapses after losing no-confidence vote in parliament - Bloomberg

France's government has collapsed. What happens next?

Following a no-confidence vote in the National Assembly, French Prime Minister Michel Barnier’s government fell on Wednesday. This vote was largely driven by the left-wing coalition NFP and the far-right National Rally party (RN) after Barnier bypassed a parliamentary vote using Article 49.3 to pass the 2025 social security budget plan.

What are the next steps for France?

Michel Barnier is expected to remain in a caretaker capacity, similar to former Prime Minister Gabriel Attal's role after President Emmanuel Macron dissolved the National Assembly following significant electoral losses in the EU elections.

In this interim phase, the caretaker government is restricted to managing current affairs without the power to pass new laws. Macron is tasked with appointing a new prime minister but faces no immediate deadline. However, selecting a viable candidate is challenging due to the fragmented National Assembly, which lacks a clear majority.

This summer, it took Macron nearly two months to propose a prime minister who could gain acceptance in the Assembly. New legislative elections are not scheduled until next July.

Potential candidates for the Prime Minister position include Sébastien Lecornu, the current Minister of Armed Forces, and François Bayrou, leader of the centrist MoDem party. Meanwhile, the NFP coalition continues to back economist and civil servant Lucie Castets, despite her previous rejection by Macron.

Macron faced criticism for monopolizing the selection process last summer, excluding political parties. Political analyst François-Xavier Millet suggests that for stability, the choice should involve broader consensus among MPs.

Emmanuel Rivière, a public opinion expert, argues that the focus should not merely be on choosing a personality but rather establishing a project and agreement to navigate France’s budgetary challenges, potentially through appointing a technocrat with a specific mission.

What’s the outlook for Macron?

Though Macron's presidency extends to 2027, some political factions call for his resignation amid ongoing turmoil from the dissolution of parliament.

Public opinion of Macron has declined, with only 22% of French citizens expressing satisfaction per a November Ifop poll. Macron remains committed to serving his term fully: “with all my energy, to the last second,” he asserts.

Millet notes that while resignation could alleviate immediate tensions, it would ultimately exacerbate chaos given the Assembly’s current fragmentation.

What is the status of the budget?

Should the budget remain undecided by December 20, the government has the authority to enact it by ordinance. For the social security budget, this can occur after 50 days of stalemate; for the national budget, after 70 days.

An alternative approach could temporarily extend the 2024 budget into 2025, which serves as a stopgap measure, according to Millet.

While France does not face an imminent shutdown like the United States, political turbulence might deter investors. Additionally, France faces pressure from the EU to manage its deficit, currently at 6% of GDP, exceeding the EU's 3% threshold.