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(Bloomberg) — France’s government risks collapse before the end of the week, with potentially painful economic and financial consequences.
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On Monday, Marine Le Pen’s far-right National Rally said it will back a motion to topple the French government, after Prime Minister Michel Barnier failed to agree to all of its demands on next year’s budget.
Here’s a guide to what happens next:
How quickly could things play out?
The French premier declared at the National Assembly on Monday that he would use a constitutional mechanism that allows for the adoption of the social security bill without a vote, but opens the door to no-confidence motions. Immediately after that announcement, the National Rally said it would support censuring the government.
Because Le Pen’s party is the largest in the lower house of parliament, her backing makes it likely Barnier will be ousted as things stand.
After opposition groups filed censure motions on Monday, 48 hours must elapse before parliament begins to debate. No-confidence ballots could then come as early as Wednesday.
Constitutional experts, politicians and economists do not agree on exactly what would come next in such an untested scenario so close to the end-of-year deadline for the budget.
Bills rejected by censure in France are not technically dead, but a caretaker government has little legitimacy to carry them through parliament or attempt implementation with statutory measures.
There are provisions available to avoid a complete shutdown on Jan. 1, but how a weakened government implements those — and the subsequent impact of using such maneuvers — are hard to predict.
“At the end of day there is no instruction manual on what to do if a budget isn’t adopted,” Oddo BHF’s chief economist Bruno Cavalier said. “We are testing the limits of a system in a country that was supposed to have the political stability of a kind of republican monarchy.”
Is France at risk of a U.S.-style shutdown?
The risk of an American-style federal public-services shutdown is close to zero thanks to the existence of an emergency bill — known as a loi spéciale — to get parliamentary authorization to collect taxes in January. The “special law” would allow the government to carry over the prior year’s budget for a few months into the new year.
However, there are risks with using the stopgap measure that are hard to predict. The procedure entails authorizing only the minimum spending the government considers vital to continue providing public services, and no more than voted in the 2024 budget. Depending on the interpretation, that could lead to severe belt tightening, particularly in areas like defense where spending was due to increase.