Transcription
French President Emanuel Macron is in a bit of a pickle. His approval ratings are at an all-time low. France's fiscal position is so bad that there's even talk of an IMF bailout. And his latest prime minister, France Beiru, looks set to lose a confidence vote on Monday. If this were to happen, it would leave Macron in a sort of political dead end. So, in this video, we'll explain France's unfolding economic and political crisis and how it could spell the end for Macron.
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So, let's start with a bit of context. Since the pandemic, France has run pretty massive deficits, coming in at 8.9% of GDP in 2020 and then 6.6% of GDP in 2021. In 2022, it looked like France was on the way to normalizing its finances when the deficit shrank to 4.7% of GDP. However, in 2023, the deficit unexpectedly expanded to 5.4% of GDP, one of the highest in the EU and well above the EU's 3% target. The main reason for this sudden increase in the deficit was weak GDP growth, which fell from about 2.5% in 2022 to just 0.8% in 2023. Lower than expected growth meant lower than expected tax revenues, and this was the main reason the deficit, which is just the gap between spending and revenue, came in above expectations.
Anyway, at this point, the French government decided that it needed to do something. A deficit of 5.4%, which widened further to 5.8% in 2024, clearly isn't sustainable in the long term, especially given that France's overall debt burden is already above 110% of GDP, one of the highest in the world. Without a sudden increase in GDP growth, which looks unlikely at the moment, the only way for France to balance its books would be to cut spending or raise taxes.
However, French President Emanuel Macron's ensemble alliance had lost its absolute majority at the 2022 legislative elections, which meant that it needed support from other parties to pass legislation. Macron and his prime minister, Elizabeth Bourne, were unable to convince other parties to support their agenda, which meant that Bourne had to repeatedly resort to article 49.3, an arcane constitutional provision that allows the prime minister to pass a bill without a vote in the National Assembly unless a motion of no confidence is successfully passed within 48 hours.
However, it soon became clear that relying on article 49.3 wasn't politically sustainable. There were recurring protests. Macron's approval rating was plummeting, and the threat of a no-confidence vote grew every time article 49.3 was invoked. With article 49.3 essentially off the table and Bourne unable to cobble together a majority in the National Assembly, legislative deadlock ensued. Macron tried to break the deadlock by replacing Bourne with the fresh-faced Gabriel Attal, but it didn't work. So, in mid-2024, Macron called snap legislative elections in the hope of winning an outright majority. Again, this didn't work. Macron's centrist coalition actually lost seats, and both the NUPES coalition to his left and National Rally to his right had campaigned on programs that would actually require more borrowing.
Macron then appointed yet another prime minister, Élisabeth Borne, who tried to win support from the National Rally to get a new budget passed. This didn't work. So, Borne tried to use article 49.3 to force it through, which triggered a no-confidence vote that Borne lost after only 3 months in the job. Borne was then succeeded by France Beiru last December. Beiru was able to survive a no-confidence vote in January by agreeing to another round of negotiations over Macron's contentious pension reforms, which aimed to raise France's retirement age from 62 to 64 for most workers.
However, this was only a temporary reprieve, and Beiru has since failed to pass any budget-balancing measures. His plan includes €43.8 billion in savings for 2026, 80% of which would come from spending cuts. Among the most controversial austerity measures are plans to remove two national holidays, a freeze on pensions, and €5 billion in health cuts. To no surprise, these proposed measures haven't gone down well with the French electorate. A broad anti-government movement has since emerged on social media, calling for a general strike on September the 10th, while trade unions are also calling for further strikes on September the 18th.
In a bid to break this deadlock, in late August, Beiru called for a parliamentary confidence vote in his government and its budget, which will take place on September the 8th. Beiru was presumably hoping that by raising the stakes, he might pressure some opposition parties into backing his budget to avoid toppling yet another prime minister and all the chaos that comes with that. But basically, every large opposition party, including the National Rally, France Insoumise, the Socialists, the Greens, and independent left-wing groups, have all said they will not support Beiru. This all but guarantees his defeat on Monday, which will in turn force him and his government to resign.
The real question then is not whether Beiru will lose the vote, but what Macron will do next. And well, there doesn't seem to be a way forward. Broadly speaking, Macron has two options. First, Macron could attempt to replace Beiru with yet another prime minister. But given that the previous four have all failed, it's hard to see this making any difference. It's not even clear who Macron could appoint at this point. It looks like an impossible job, and many of the prominent figures within Macron's centrist bloc are keen to distance themselves from his increasingly unpopular presidency with an eye on the upcoming presidential election in 2027.
The second option for Macron would be to call another snap election. To be fair, polls suggest that most of the electorate want a snap election to be held if Beiru's government falls. But other polls suggest new elections will likely just result in another hung parliament, with maybe a few more seats for the National Rally. This wouldn't resolve the political deadlock. It could even make it worse and would make Macron look impotent. This is why, despite his repeated insistence to the contrary, there's now growing pressure on Macron to resign, even from within his own camp.
The longer the deadlock persists, the worse the fiscal crisis will get because the markets will interpret the deadlock as evidence that France is politically incapable of balancing its budget. French bond yields have already risen dramatically in recent months, creating a sort of doom loop. Rising bond yields mean France needs even more severe austerity to balance its budget, which makes any budget even less likely to pass, which makes the market even nervier, which pushes up bond yields, etc. The unfortunate reality for France, though, is that Macron's resignation would probably make the budget crisis even worse. Because while the bond markets don't like deadlock, they really don't like political chaos or Macron's probable successors, who all apparently want more borrowing.
Now, when you're diving into complicated topics such as this, it's quite easy to get caught up in what you know without even missing a beat. But what about the stories you don't see? Or what happens when the stories you do see are purposefully leaving out information to try and sway your thinking? Thankfully, our sponsor this week, Ground News, are experts at helping with just that. Ground News is a website and app that collects thousands of articles from around the world and puts them all in one place for you to easily compare how news is being covered by different outlets online. For each and every story, you can see the number of sources reporting on it, as well as the political bias, factuality, and ownership of said sources. For example, if we take this story on Beiru calling the confidence vote, you can see that there are 100 sources reporting on it, with 11 of them coming from the left and 16 of them coming from the right. You can even compare the headlines to see what either side is saying, with the left framing Beiru's confidence vote as a crisis signaling government fragility and financial peril, in contrast to the right, which adopts a more urgent and partisan tone, portraying the vote as a decisive battle for the fate of France.
That's not all, though. Ground News has tons of super handy features. Our personal favorite is their blind spot feed. Here you can find stories that have been disproportionately covered by one side of the political spectrum, helping you challenge your perspective on someone else's media reality. Here at TLDDR, we're passionate about helping you understand how bias may affect the media you consume, something Ground News also firmly believes in. Because of this, we're offering 40% off the unlimited access Vantage plan subscription by using the link in the description or scanning the QR code on screen. You can only access this discount through our link. So, make sure you go to ground.news/tlddr or click the link in the description to get started today.