Leading economist Clemens Fuest, head of the Munich-based Ifo Institute, has cautioned about significant risks to the European economic outlook amid an impending vote of no confidence in French Prime Minister François Bayrou.
Fuest warned that should the National Assembly vote to oust Bayrou, effectively halting his planned austerity measures, it would heighten uncertainty regarding France’s future fiscal policy and potentially push the nation towards a serious financial crisis. He emphasized France’s crucial role within the EU and Eurozone, stating that a shift in direction would further weaken Europe’s already fragile economic growth.
The economist argues that the situation in France highlights the weakness of existing European stability rules, indicating their inability to prevent individual member states within the currency union from falling into a situation of excessive debt accumulation. Fuest noted that France’s current challenges stem not from a sudden crisis, but from a prolonged buildup of state debt over many years.
Bayrou is slated to face the confidence vote in parliament this afternoon, where he will attempt to garner support for his proposed 44 billion euro package of savings. Expectations point towards a rejection of the motion and subsequent resignation.
Since the 2024 parliamentary elections, President Emmanuel Macron’s party has lacked a governing majority in the National Assembly. Bayrou has held office for less than nine months, following a short tenure of three months for his conservative predecessor, Michel Barnier. France’s public finances are currently under considerable strain, with a recent budget deficit nearing 5.8%, nearly double the permitted level. National debt stands at 114% of gross domestic product. The nation’s debts to creditors currently total approximately 3.3 trillion euros, placing it as the most indebted state within the Eurozone.
