The situation for French Prime Minister Francois Bayrou in the upcoming parliamentary vote on September 8 seems grim, with the government lacking the majority needed to implement its budget-cutting plans aimed at reducing France’s significant public debt. The outcome of the vote is uncertain, with possible scenarios ranging from a call for new elections, as demanded by the far-right Rassemblement National, to President Emmanuel Macron trying to form another minority government.
Economically, the issue revolves around France’s enormous debt burden. France holds more consolidated national debt than any other EU country, with sovereign debt reaching around €3.35 trillion ($3.9 trillion) and a debt-to-GDP ratio of 113%, climbing to 125% by 2030. France faces challenges in meeting the EU’s target of reducing the budget deficit below 3%, which necessitated drastic savings. However, politically charged cuts remain difficult to push through, leading to financial markets responding with higher risk premiums on French bonds.
The potential instability caused by these economic challenges poses a threat to the stability of the euro, according to Friedrich Heinemann of the Zew Leibniz Center for European Economic Research. Although international financial markets are currently not overly worried about a new short-term debt crisis, there is concern about the long-term implications of further political destabilization in a major economy like France.
Furthermore, the political stalemate in France comes at a time when the EU faces conflict with the United States over trade policy, including proposed taxes on US tech giants. This adds pressure on France and the European Union, highlighting the need for decisive action to stabilize both the economy and political relations.
Source: https://www.dw.com/en/could-france-s-economic-turmoil-spark-eurozone-debt-crisis/a-73886339?maca=en-rss-en-all-1573-rdf
