French Premier Survives No-Confidence Vote, Securing New Budget

French Prime Minister François Bayrou has weathered a no-confidence vote, securing the passage of the 2025 budget after weeks of political turmoil. The vote, held on Wednesday, saw Bayrou's government survive thanks to the support of key political parties, including the Socialists and National Rally (RN).



Bayrou's government faced a significant challenge when it used Article 49.3 of the French Constitution to ram through the budget without a parliamentary vote. This move allowed the opposition to propose a no-confidence motion, which was backed by the hard-left France Unbowed (LFI), Communists, and Greens. However, the Socialists and RN both declined to support the motion, giving Bayrou the numbers he needed to survive.

The 2025 budget, which was passed without a parliamentary vote, includes several key components aimed at addressing France's economic challenges and complying with EU pressure to reduce debt and deficit. These components include:

1. Cost-cutting measures: The budget includes a significant reduction in spending, with a total of 40 billion euros ($42 billion) in cuts. This is an attempt to rein in France's deficit and reduce its overall debt burden.
2. Tax increases: The budget also includes a 20 billion euro ($21.5 billion) increase in taxes, which is intended to help offset the spending cuts and generate additional revenue for the government.
3. Keeping an extra tax on large companies: The joint parliamentary committee's conclusions retained an extra tax on large companies, which is expected to contribute to the government's revenue and help reduce the deficit.
4. Increasing a tax on financial transactions: The budget also includes an increase in the financial transactions tax, which is another source of revenue for the government.
5. Avoiding job cuts in national education: Bayrou agreed not to cut 4,000 jobs in national education as previously envisaged, which may help to maintain public support for the government and avoid social unrest.
6. Addressing EU pressure: By implementing these cost-cutting measures and tax increases, the French government aims to comply with EU pressure to reduce its debt and deficit. The EU has set a target for member states to maintain a deficit below 3% of GDP and a debt-to-GDP ratio below 60%.

The passage of the 2025 budget has been contentious, with the opposition criticizing Bayrou's use of Article 49.3 and the lack of parliamentary debate. However, the budget's approval provides some much-needed stability for France's economy and addresses the country's fiscal challenges. As the political landscape continues to evolve, investors will be watching closely to see how the government implements these measures and navigates the complex political environment.