The chances of the French Executive falling due to a motion of censure, given the impossibility of moving the Budgets forward, continue to increase in a completely stagnant debate. Although it seems that Barnier’s Executive still does not notice the said pressure on the back of the neck. The Minister of Economy, Finance and Industry, Antonie Armand, assured this Thursday that he is open to making “concessions” on the budget text when the threat of the motion of censure is clear.
In a morning interview on the economic channel BFM TVcollected by elEconomista.es, the head of the French finances reiterated that he would be willing to talk about concessions at the moment in which the far-right group National Group (RN, for its acronym in French) specifies whether it will finally go ahead with the motion of censorship in the coming months.
Prime Minister Michel Barnier said in another television interview on Tuesday that the fall of his government would cause “a financial storm.” And precisely, the head of Finance let the ball fall into Le Pen’s court: “Whatever differences in values we have (for Le Pen), today we face a very serious situation for the country. The Prime Minister spoke It is not a word chosen at random, it is a word that has financial, economic and budgetary resonance, and we are obviously willing to make concessions to avoid this storm,” he said.
According to Barnier’s accounts, the French treasury needs an adjustment of 60 billion euros in the next fiscal year. Of that total, a third will correspond to tax increases and two thirds (40,000 million) to cuts in public spending.
? France will close 2024 with its largest deficit since the European debt crisis
?? He tells it @carlos_asensio
? All the details in the following link: pic.twitter.com/UirFpnIUWP
— elEconomista.es (@elEconomistaes) October 7, 2024
Asked about specific concessions, Armand spoke about the electricity tax, which is expected to be increased in this budget project. Something that Marine Le Pen, leader of the French extreme right, considered “inadmissible”. This tax on final electricity consumption was 32 euros per megawatt hour (MWh), but the effects of the energy crisis due to the war in Ukraine caused the Government to reduce it to less than one euro MWH in 2022.
Last February it increased to 21 euros MWh and today it is 22.50 euros. The regulations anticipated that in February 2025 it would return to its level prior to the inflation crisis, but the Government intends in these budgets to be able to increase taxes on electricity to levels higher than those before the crisis and thus raise up to 3,000 million euros .
Marine Le Pen and her party will oppose “anything that could undermine the purchasing power of the French.” Therefore, the French far-right is even willing to vote as a bloc with the left to bring down the current government. “We want clear and firm commitments,” said Le Pen, about eliminating the 3 billion euro increase in the price of electricity. Likewise, they also ask that the elimination of reimbursement for new drugs and the suppression of pension revaluation until June.
Regarding the electricity tax, Armand was willing to “make a gesture” but “not at any price”, but only “depending on the budget project we have.”
alarmist tone
The discursive strategy of the Barnier Government is to raise the alarm that a suppression of payments by the State, as almost happened in the United States, is real. The Minister of Economy and Finance puts pressure on the 66 deputies of the socialist group, speaking of “State responsibility”, since they could allow the budget to go ahead and the Government to move forward with a simple abstention.
In the event that the Government falls “we run the risk of stagnating like a plane that is at altitude and that at a given moment runs the risk of losing control. However, there is a way: this way is this budget,” he warned. the Minister of Economy, although he acknowledged that there is room for improvement.
“There is the path towards the unknown, towards degradation, towards the dislocation of the country, there is the path towards the leap into the unknown, budgetary, economic and financial,” he continued.
France is not Greece?
It is curious how, at the same time that the Government talks about a financial “storm”, they then try to send messages of calm. The Minister of Economy reiterated in the interview that “France is not Greece”, while the French 10-year bond briefly surpassed that of the Greek country.
Currently, the French accounts are completely out of balance with a deficit that is expected to end the year at 6.1% of GDP and the debt at 110% of GDP. In the case of Greece, the liability is close to 160% and in Spain it exceeded 105% of GDP in the second quarter of this year.
But what makes it evident that France is not Greece is that the Greek country is on a path of debt and deficit reduction. Since 2020, they have reduced liabilities by 40 points and the budget presents a deficit of 1.5%. Likewise, the IMF Fiscal Monitor, published in October of this year, predicts that Greece will manage to reduce its deficit to 0.9% next year and will remain stuck at 1.5% until 2029. For its part, the debt will will be stuck at 145% on average.
On the other hand, the multilateral entity does not trust that France will be able to tackle the problem with its accounts. They anticipate that the deficit stagnates at 6%almost double what Brussels orders, and the debt will rise to 124% of GDP in 2029.
The French Interior Minister himself, Bruno Retailleau, assured that if tomorrow the government “collapses” over the budget issue “there will immediately be a Greek-style financial crisis.”
The French far-right distances itself from the accusations that attribute it to trying to lead the country to a financial collapse like Greece in 2012 and a government shutdown like the United States.
In a press conference, one of the men from the National Group, Jean-Philippe Tanguy, accused Barnier of shouting “the wolf is coming!”, after his statements on TF1’s evening news program on Wednesday. “By not being able to guarantee a tax reform based on justice, with fair taxes for everyone, Mr. Barnier is forced to sow panic and chaos,” Tanguy reiterated.
The calendar works against the Government. On Monday, December 2, the Social Security budget project will go down from the Senate to the National Assembly and Barnier has already said that he will “surely” resort to article 49.3 of the Constitution, which allows him to approve laws without a vote. This will subject him to the first motion of censure promised by the left, surely, on December 4.
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