Authored by Mike Shedlock via MishTalk.com,
The entire eurozone is in shambles, and Trump’s demands will accelerate the crisis. One seriously must wonder if that is his real goal.+
The technocrat French Prime Minister proposes the same budget that collapsed the prior French government.
How is that supposed to work?
France24 provides this background on Snap Election Turmoil that led to this crisis.
French President Emmanuel Macron dissolved parliament and called a snap legislative vote in a surprise move after the far right trounced his centrist alliance in the European elections. After two rounds of voting on June 30 and July 7, neither of the country’s three main political blocs managed to secure an outright majority. A coalition of the French left, the New Popular Front, surprised everyone by taking the lead with 182 seats, Macron’s Ensemble presidential camp won 168 seats while the far right National Rally, who polls had tipped to win, languished in third place with 143 seats.
Following the election, Gabriel Attal, Macron’s Prime Minister resigned. Macron named Michel Barnier as Attal’s technocrat replacement.
In France, the Prime Minister heads up domestic policy while the president heads up foreign policy and appoints Prime Ministers, typically from members of parliament.
Michel Barnier proposed a budget that failed to pass parliament and on December 4, French lawmakers vote to oust Barnier in the first successful no-confidence vote since 1962.
On December 23, French President Emmanuel Macron named François Bayrou as his new technocrat Prime Minister.
Uncharted Territory
Stepping back one more time, on July 7, 2024, I commented France Is in Uncharted Territory, Expect a Big Political Catfight
No Agreement Questions and Answers
Q: Is there anyone acceptable to the far Left except someone on the far Left?
A: According to [far left leader] Melenchon, noQ: Is there anyone acceptable to the far Right except someone on the far Right?
A: Certainly not.Q: Is there a center Majority?
A: NoThere Is No Magic Solution
There is no magic solution and that was evident immediately from the preliminary results, at least to anyone who can do simple math.
Despite the obvious math problem, perhaps some coalition government compromise forms out of this mess. Just don’t expect it to be stable.
On some issues, notably retirement age, the Far Left and Far Right are aligned. How’s that supposed to ever work?
The ultimate winner in this election will be the party that can stay as far away from the Center/Left catfight as possible.
I believe it’s safe to say that I called this correctly.
PM Bayrou Under Fire
Bayrou is now under fire. He proposed the exact same budget that led to the collapse of Barnier.
Politico reports French Government to Copy-Paste Budget that led to Predecessor’s Downfall.
How can a new government get a budget ready under the tightest of time pressure?
By picking up where their predecessors left off, even if it got them kicked out of office.
That is at least what French Prime Minister François Bayrou plans on doing — using Michel Barnier’s blueprint as a starting point for his own budget, despite the fact that opposition lawmakers ousted him over proposals to cut spending and increase taxes.
After Barnier and his government fell to a no-confidence vote last month over his plans to reduce France’s “colossal debt” through €40 billion in spending cuts and €20 billion in tax hikes, the country entered the new year without a proper budget for the first time in its modern history.
“They can tweak [the budget], but they can’t change it in depth … I don’t really see how they’re going to put forward [legislation] less likely to lead to a vote of no confidence,” the left-wing head of the parliament’s finance committee Eric Coquerel told POLITICO.
There are also concerns that the government may not be able to enact Barnier’s planned one-off windfall tax on big companies and wealthy individuals, as it would mean enacting a law in 2025 to tax revenue generated in 2024. The former premier had touted the move as a way to help reduce the budget deficit without placing too big a burden on majority of French taxpayers.
France is Now Ungovernable
Also on July 7, I commented France is Now Ungovernable Following a Pyrrhic Victory for the Left-Green Alliance
Macron’s Ensemble coalition currently has 249 members of the National Assembly.
After this “win” Ensemble will have 150-170 seats.
Macron will come to regret the elections.
Snap Election Mistake
On January 2, 2025, CNBC reported Macron Admits Snap Elections Destabilized France
- As France enters the new year, there’s little hope that the political and economic uncertainty that’s been plaguing Paris for months will disappear in 2025.
- A new minority government is in place but it faces the same challenges as before — how to get political rivals in France’s National Assembly to agree to spending and taxation plans for 2025.
- France’s budget deficit is seen standing at 6.1% in 2024 and its debt pile at 112% of gross domestic product.
- Credit ratings agency Moody’s downgraded France’s credit rating last month, warning that political fragmentation was “more likely to impede meaningful fiscal consolidation”
Expect a Financial Crisis in Europe With France at the Epicenter
Behind all this bickering is a huge debt crisis.
Who called for that?
Oh, I found it: March 27, 2024: Expect a Financial Crisis in Europe With France at the Epicenter
The EU never enforced its Growth and Stability Pact or Maastricht Treaty rules. The crisis is coming to a head with France and Italy in the spotlight.
EU’s Golden Rules
According to the reformed rules, an EU member state’s debt may not exceed 60% of gross domestic product (GDP).
Highly indebted EU countries with debt levels over 90% of GDP have to reduce their debt ratio by one percentage point annually, countries
Additionally, the general government deficit — the shortfall between government revenue and spending — must be kept below 3%.
According to the commission’s economic forecast, France is at -5.5%, Italy is at -4.4% and Belgium is at -4.4% and will breach this deficit limit in 2024.
Austria, Finland, Estonia, Hungary, Malta, Poland, Romania, and Slovakia also have deficits that are too high according to the rules. Spain is at exactly -3.0%.
2025 Budget Deficit
On January 6, 2025, Reuters reported French finance minister says eyes 2025 budget deficit in 5-5.5% range
French finance minister Eric Lombard said France’s budget situation was “serious” , adding he targeted a 2025 deficit in a range of 5% to 5.5% of gross domestic product (GDP).
Lombard also told France Inter radio that the budget deficit would “probably” be around 6.1% in 2024.
On June 21, 2024, I commented Debt Brakes and Treaty Requirements About to Smash the EU
The EU has launched an Excessive Debt Proceeding against France. It won’t stop there.
The Bayrou government is struggling to get agreement on a 5.5 percent deficit when it needs to get to 3.0 percent while shrinking debt from 112 percent of GDP to 60 percent of GDP.
And to get to 5.5 percent, it needs to pass a retroactive tax hike for 2024.
In this setup, I fail to see why any political party would want to win an election.
On December 17, 2024 I asked So, What Country Wants to Be Like Germany Now?
The collapse of Germany shocks many. But I have been discussing why this was inevitable for over a decade.
Trump Demands Defense Spending 5 Percent of Europe GDP, No Chance of That
On January 9, I noted Trump Demands Defense Spending 5 Percent of Europe GDP, No Chance of That
Much of the EU is struggling to get defense spending up to 2 percent of GDP. 5 percent of GDP has zero chance. Let’s discuss the math.
The entire eurozone is in shambles, and Trump’s demands will accelerate the crisis. One seriously must wonder if that is his real goal.
Authored by Mike Shedlock via MishTalk.com,
The entire eurozone is in shambles, and Trump’s demands will accelerate the crisis. One seriously must wonder if that is his real goal.+
The technocrat French Prime Minister proposes the same budget that collapsed the prior French government.
How is that supposed to work?
France24 provides this background on Snap Election Turmoil that led to this crisis.
French President Emmanuel Macron dissolved parliament and called a snap legislative vote in a surprise move after the far right trounced his centrist alliance in the European elections. After two rounds of voting on June 30 and July 7, neither of the country’s three main political blocs managed to secure an outright majority. A coalition of the French left, the New Popular Front, surprised everyone by taking the lead with 182 seats, Macron’s Ensemble presidential camp won 168 seats while the far right National Rally, who polls had tipped to win, languished in third place with 143 seats.
Following the election, Gabriel Attal, Macron’s Prime Minister resigned. Macron named Michel Barnier as Attal’s technocrat replacement.
In France, the Prime Minister heads up domestic policy while the president heads up foreign policy and appoints Prime Ministers, typically from members of parliament.
Michel Barnier proposed a budget that failed to pass parliament and on December 4, French lawmakers vote to oust Barnier in the first successful no-confidence vote since 1962.
On December 23, French President Emmanuel Macron named François Bayrou as his new technocrat Prime Minister.
Uncharted Territory
Stepping back one more time, on July 7, 2024, I commented France Is in Uncharted Territory, Expect a Big Political Catfight
No Agreement Questions and Answers
Q: Is there anyone acceptable to the far Left except someone on the far Left?
A: According to [far left leader] Melenchon, noQ: Is there anyone acceptable to the far Right except someone on the far Right?
A: Certainly not.Q: Is there a center Majority?
A: NoThere Is No Magic Solution
There is no magic solution and that was evident immediately from the preliminary results, at least to anyone who can do simple math.
Despite the obvious math problem, perhaps some coalition government compromise forms out of this mess. Just don’t expect it to be stable.
On some issues, notably retirement age, the Far Left and Far Right are aligned. How’s that supposed to ever work?
The ultimate winner in this election will be the party that can stay as far away from the Center/Left catfight as possible.
I believe it’s safe to say that I called this correctly.
PM Bayrou Under Fire
Bayrou is now under fire. He proposed the exact same budget that led to the collapse of Barnier.
Politico reports French Government to Copy-Paste Budget that led to Predecessor’s Downfall.
How can a new government get a budget ready under the tightest of time pressure?
By picking up where their predecessors left off, even if it got them kicked out of office.
That is at least what French Prime Minister François Bayrou plans on doing — using Michel Barnier’s blueprint as a starting point for his own budget, despite the fact that opposition lawmakers ousted him over proposals to cut spending and increase taxes.
After Barnier and his government fell to a no-confidence vote last month over his plans to reduce France’s “colossal debt” through €40 billion in spending cuts and €20 billion in tax hikes, the country entered the new year without a proper budget for the first time in its modern history.
“They can tweak [the budget], but they can’t change it in depth … I don’t really see how they’re going to put forward [legislation] less likely to lead to a vote of no confidence,” the left-wing head of the parliament’s finance committee Eric Coquerel told POLITICO.
There are also concerns that the government may not be able to enact Barnier’s planned one-off windfall tax on big companies and wealthy individuals, as it would mean enacting a law in 2025 to tax revenue generated in 2024. The former premier had touted the move as a way to help reduce the budget deficit without placing too big a burden on majority of French taxpayers.
France is Now Ungovernable
Also on July 7, I commented France is Now Ungovernable Following a Pyrrhic Victory for the Left-Green Alliance
Macron’s Ensemble coalition currently has 249 members of the National Assembly.
After this “win” Ensemble will have 150-170 seats.
Macron will come to regret the elections.
Snap Election Mistake
On January 2, 2025, CNBC reported Macron Admits Snap Elections Destabilized France
- As France enters the new year, there’s little hope that the political and economic uncertainty that’s been plaguing Paris for months will disappear in 2025.
- A new minority government is in place but it faces the same challenges as before — how to get political rivals in France’s National Assembly to agree to spending and taxation plans for 2025.
- France’s budget deficit is seen standing at 6.1% in 2024 and its debt pile at 112% of gross domestic product.
- Credit ratings agency Moody’s downgraded France’s credit rating last month, warning that political fragmentation was “more likely to impede meaningful fiscal consolidation”
Expect a Financial Crisis in Europe With France at the Epicenter
Behind all this bickering is a huge debt crisis.
Who called for that?
Oh, I found it: March 27, 2024: Expect a Financial Crisis in Europe With France at the Epicenter
The EU never enforced its Growth and Stability Pact or Maastricht Treaty rules. The crisis is coming to a head with France and Italy in the spotlight.
EU’s Golden Rules
According to the reformed rules, an EU member state’s debt may not exceed 60% of gross domestic product (GDP).
Highly indebted EU countries with debt levels over 90% of GDP have to reduce their debt ratio by one percentage point annually, countries
Additionally, the general government deficit — the shortfall between government revenue and spending — must be kept below 3%.
According to the commission’s economic forecast, France is at -5.5%, Italy is at -4.4% and Belgium is at -4.4% and will breach this deficit limit in 2024.
Austria, Finland, Estonia, Hungary, Malta, Poland, Romania, and Slovakia also have deficits that are too high according to the rules. Spain is at exactly -3.0%.
2025 Budget Deficit
On January 6, 2025, Reuters reported French finance minister says eyes 2025 budget deficit in 5-5.5% range
French finance minister Eric Lombard said France’s budget situation was “serious” , adding he targeted a 2025 deficit in a range of 5% to 5.5% of gross domestic product (GDP).
Lombard also told France Inter radio that the budget deficit would “probably” be around 6.1% in 2024.
On June 21, 2024, I commented Debt Brakes and Treaty Requirements About to Smash the EU
The EU has launched an Excessive Debt Proceeding against France. It won’t stop there.
The Bayrou government is struggling to get agreement on a 5.5 percent deficit when it needs to get to 3.0 percent while shrinking debt from 112 percent of GDP to 60 percent of GDP.
And to get to 5.5 percent, it needs to pass a retroactive tax hike for 2024.
In this setup, I fail to see why any political party would want to win an election.
On December 17, 2024 I asked So, What Country Wants to Be Like Germany Now?
The collapse of Germany shocks many. But I have been discussing why this was inevitable for over a decade.
Trump Demands Defense Spending 5 Percent of Europe GDP, No Chance of That
On January 9, I noted Trump Demands Defense Spending 5 Percent of Europe GDP, No Chance of That
Much of the EU is struggling to get defense spending up to 2 percent of GDP. 5 percent of GDP has zero chance. Let’s discuss the math.
The entire eurozone is in shambles, and Trump’s demands will accelerate the crisis. One seriously must wonder if that is his real goal.
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