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.
Its bend and bend and bend, time to BRAKE!
Trump is forcing free trade by threatening to counter their tariffs against the US with our own equally destructive tariffs. He is forcing a level playing field and letting them to decide their own direction. This will be divisive because the elite-top-down-controls need the tariffs with taxes on their own people to fund their nonsense policies. The citizens will cheer as the elite coalition disintegrates. The EU will dissolve with the elite infighting but the debt will remain outstanding and debilitate further funding. The entire social support system there will undergo reduction just as it will occur in the US. Decisions will shift to local areas creating and supporting their own solutions as taxation is reduced. Wall Street will have many issues to deal with and I hope becomes much less an influence.
Not mentioned in the post is the economic impacts on the Eurozone from the war between Ukraine and Russia. The energy cost increases if not borne directly by the population are indirectly by monetization. This is a big source of increasing political polarization.
The rabid neocons as well as the Democrats in the U.S. are finding out directly what happens when these costs are dumped on the backs of the middle class via monetization. Trump may be successful at purging most of them soon although Rubio is a huge question mark.
The only thing Trump is going to do is play golf and run his mouth, just like last time. This is what makes him such a bargain.
France is a mess. Germany is a mess. UK is a mess. But they STILL continue to meddle in Ukraine.
That is precisely WHY they continue to meddle in Ukraine.
The goal is to tax even more overtaxed french people.
Macron has nobody behind him ,but he is still pulling the strings.
French private sector is not yet totally sinking because of government spending.
Macron’s wife being a dude is messing with everybody’s head.
This is why Trump is talking about Canada, Greenland, the Panama Canal, etc. Europe has become a liability for the US so he wants to dump them and focus on building up a sphere of influence closer to home.
Germany is next; all these countries have the same problem, which has resonated in the USA as well with the “toxic” rise of MAGA; except the political system in the US is binary, so Trump came out on top despite all efforts at suppression.
In Germany there is every chance that AfD will become the biggest party, but they will be ignored, cordon sanitair, everyone will conspire together so that their representation will have no meaningful voice. The people are voting for the ‘wrong populist right-wing’ parties. Same problem in Belgium, the Netherlands, France, Austria, Hungary, Romania, etc.
This is the trend, and as the efforts at suppression increase, the ‘populist’ parties support increases nevertheless.
France is a strongly centrist nation, with a history of Parisian dirigisme.
I am curious: Can France get away from centralism, get towards devolution like Spain has, giving each party in their Parlement freedom to do as they wish where they have a local majority?
Otherwise, maybe they deserve to sink into a civil war until they figure out how to do things again.
well said; a lil’ punk ass bitch is he
The EZ was concocted as a monetarist union and the EU was a derivative thereof of monetarist union but without the Euro as the medium of exchange for the 27 countries within it.
The history of monetary unions are failures because they are not fiscally tied to each other. When crises develop they create fissures that become splits, that become breakups.
Europe has been in and out crises since the so-called Great Recession similar to China, the US, Russia, Japan, etc., yet no one is forecasting the aforementioned countries of collapsing anytime soon. Europe is teetering due the creation of the EZ. Period…
You don’t get a full picture if you only talk about fiscal situation.
It has to be matched by monetary situation which is the laxest imaginable.
Consequently, there is a property bubble just like everywhere else.
The youth without assets will own nothing an be very pizzed.
Just waiting for the spark.
If Trump does what he does and continues on as he does, and this was a Hollywood movie, he would be the anti-Christ. Next to come are the four horsemen.The Far Right gets what they want, and Kaos is unleashed. Careful what you wish for.
A deal with the devil never ends up good, and history repeats. Famine, war, death, and pestilence.
If this was a Hollywood movie he’d be played by Rodney Dangerfield.
As I recall Rodney Dangerfield came out on top by the end of Caddyshack.
Maybe I’m missing something, but France doesn’t hit the global top 10 wrt Debt to GDP ratio: https://worldpopulationreview.com/country-rankings/debt-to-gdp-ratio-by-country
We in the US can proudly say we make that list with Debt at 129% of GDP (maybe things have shifted a bit since that was put out). It sure seems to me like Debt to GDP is really the best measure of debt.
Absolutely not. You don’t service your debt from turn-over, but from earnings (revenue). The American debt/revenue ratio is astronomical compared to EU countries.
And American debt numbers do not include state/local debts, nor contingent liabilities (Sally Mae, Freddy Mac, etc).
Agree that debt issue likely worse for U.S.
French government debt/revenue is significantly lower than U.S. govt debt/revenue since French gov’t is larger fraction of French economy.
Japan and China will still take the cake, however.
Debt-to-GDP only covers government debt at one level, there is total debt which covers private and corporate.
Another measure would be financialization of economy, buying everything on credit down to toilet paper. It is like train wreck pulled/stopped by interest rates.
It has been posited by numbers of my sources that the elimination of europe in world affairs has been the goal of many in the State Department and the ;Federal Reserve and also Wall Street for a long time, in particular guaranteeing that Germany and Russia never become allies.
Its really a reasonable goal and its been done most effectively, the story is almost over.
Yes. But it has thrown Russia into the arms of China, which is not a gain.
Certainly hard to know where US Foreign policy is headed as Secretary of State yet to be confirmed. However Rubio is Centrist by any standards and Trump is dumping NeoCon War makers..
His statements on Landmass in N. America do point towards a Fortress N. America economic and geological alignment.
On the surface he intends to focus on Domestic Security and prioritize economic rebuilding of USA.
Less spreading “Democracy” across the Globe and let Europe put their Big Boy pants on and straighten out Europe themselves.
Maybe Trump read Washington’s farewell address and thought it was good advise. Stay out of the affairs of Foreign Nations.
Lets hope so!
Rubio is a neocon, I didn’t understand why Trump chose him.
Rubio is an interesting character. He has the demeanor of a great Statesman.
He is hawkish but does not have the certifiable insanity of a John Bolton or Graham.
Compared to Blinken he is an intellectual Giant.
I think perhaps he has similarities to Pompeo without the hardliner aspects.
Fairly certain he will get confirmed and welcome anyone who proves out not to be just another Hack.
Rubio should counter balance somewhat Trumps mercury.
Greenland, Canada, Panama, Mexico … not exactly staying out of foreign affairs.
Monroe doctrine is getting a dust off.
France’s budget deficit in 2024 was 6.1% of GDP. US had a 6.4% of GDP.
Public debt in France, 112% GDP, in US 123.1% of GDP.
Germany has a debt of 63.7% GDP.
The EU has budget rules, sadly the UU doesn’t
Budget rules? – As usual, double standard.
Lol, a new level of petty.
https://x.com/EricLDaugh/status/1877786521530474764
Maybe I should invade France too…
“I’m just glad that — out of all the felonies Trump could have committed — he chose the felonies that carry no legal penalty whatsoever. Extremely shrewd.”
The conviction was a sham and will be overturned on appeal.
No felony
Note that it is a quote. It appears to come from here:
https://x.com/jarvis_best/status/1877738710898221482
Read the replies for more context.
If you look at the content of those “felonies” … they are a joke. If everyone “guilty” of those was prosecuted … major industries would have everyone in jail.
Not much of a stretch of imagination to anticipate many Trump critics wildly overstating the value of their personal property on homeowners insurance claims. Does SDNY have jurisdiction in SoCal?
“I believe it’s safe to say that I called this correctly.”
The past couple of years you’ve been far better at political calls than economic ones so perhaps that’s your calling now?
“The entire eurozone is in shambles, and Trump’s demands will accelerate the crisis. One seriously must wonder if that is his real goal.”
Great question, Mish, and yes I would hope that is his goal. I think Italy & Poland should move towards exiting the Euro. Then, let’s get France & eventually Germany out as they all have their slow move towards populism. Europe needs to shutdown immigration as much or more than we do.
Good luck, Trump!
NATO and the EU may well collapse under the pressure.
“…The entire eurozone is in shambles, and Trump’s demands will accelerate the crisis. One seriously must wonder if that is his real goal…”
To what end?
Yeah I don’t think he’s trying to accelerate anything. The Eurozone has been a bug in search of a windshield for a decade really.
He dodged jail, doesn’t care what happens now. I am in control… I paid for the votes.
Two Possibilities
#1 makes little sense because the world does not work that way. Most trade is not bilateral. Trade from Mexico consists of a lot of parts from China.
But Trump does not understand trade
Of course, you do? The tariffs from 2017 to 2020 during Trump administration did not result in inflation, China is irreedemably mercantilist and Biden expanded on the tariffs with China. Mexico is corrupt and dominated by regional warlords. Your solution?
The Tariffs in 2017 did not result in inflation largely because they were avoided. Trade moved from Russia to Vietnam and Mexico.
I have already given my solution.
If China wants to give is free stuff, we should say thank you and ask for more.
To view otherwise is like bitching at the sun because it takes jobs from candlemakers.
The only exception to this policy is in cases where reliance on China is a genuine national security threat.
They hurt my feelings, and must be punished.
All European socialists have run out of other people’s money. France is not special in this regard.
Oh. Capitalists found the scapegoat.
you say that like they’re special. We have many, many scapegoats.
Have they? The US is buying their products on credit.
Even despite forcing them to spend their money on American gas and American weapons.
No country in the EU has a debt/revenue ratio anywhere close to the astronomical American one.
ahh its France and?
“Society was cut in two: those who had nothing united in common envy; those who had anything united in common terror.”
― Alexis de Tocqueville,
Our oldest ally. I will always be there for France.
“I’d rather have a German division in front of me than a French one behind me.” General George S. Patton, Jr.
Another rifle dropper…
Ils sont finis