(Bloomberg) -- France’s budget is advancing through fractious parliamentary debates toward a precipice in December when far-right leader Marine Le Pen can let the bill become law, or trigger chaos by toppling the government in a no-confidence vote.
The initial version of a budget that was designed to plug widening holes in public finances and reassure investors is subject to a succession of votes and thousands of amendments as it winds between parliamentary committees and the floors of the National Assembly and the Senate until mid-December.
Complexities are mushrooming as Prime Minister Michel Barnier maneuvers without a majority in the lower house and amid divisions that reach even within his center-right coalition government.
Because opposition parties in France conventionally vote against the final version of a government’s finance bill, Barnier has said he will probably have to rely on a constitutional provision known as the 49.3 to adopt the budget without putting it to a parliamentary vote.
“When I see what happened at the National Assembly, it seems difficult to do otherwise at the end of the discussion,” the French premier said in an interview in Ouest-France newspaper on Thursday.
But the potential fallout from such a move — sometimes criticized as being undemocratic — will be determined by Le Pen. If she deems Barnier’s final version inadmissible, her party could support a no-confidence motion from leftist lawmakers to bring down the government.
Such an outcome would be catastrophic for the country’s efforts to rebuild credibility with investors who no longer trust France after budget deficits slipped wider and elections returned a weak minority government. A selloff in the country’s bonds since President Emmanuel Macron triggered elections in June has already pushed the premium on 10-year debt compared to Germany to around 76 basis points from less than 50.
To restore calm and bring the deficit to 5% of economic output from 6.1%, the government pledged the 2025 budget would deliver €60 billion ($63.3 billion) of savings from spending cuts and tax increases focused on the wealthiest individuals and largest companies.
Le Pen and her National Rally party have wielded their power over whether Barnier succeeds or fails by reiterating threats to back no-confidence motions proposed by other groups. But she has also indicated the far-right does not want to be an agent of chaos as it seeks to build a reputation for responsibility ahead of future elections, following significant gains in European and legislative ballots earlier this year.
A vote to bring down the government at a time of heightened geopolitical uncertainties and when the next parliamentary election can’t be held until the summer of 2025 would be a risky gamble for Le Pen. For now, she and her lieutenants are maintaining the suspense.
“We don’t mind voting a censure motion proposed by others, we will keep the possibility,” Sebastien Chenu, National Rally vice president said Friday on TF1. “It’s a budget that takes from the pockets of French people and makes zero savings so don’t count on us to give it a helping hand.”
Bluffing on the budget revolves around article 49.3 of the French constitution that can be invoked by a prime minister to adopt a bill without a vote. Last year, former Prime Minister Elisabeth Borne used the 49.3 multiple times as the budget and the attached social security bill passed between the National Assembly and senate.
Barnier, however, has the backing of far fewer lawmakers, making it riskier to trigger multiple no-confidence votes on finance bills, and he has said he wants to reflect the input from opposition parties as much as possible.
Splits within his own coalition also make the final outcome of the budget uncertain. To appease lawmakers loyal to Macron, the government has already said it will make changes to limit planned increases in levies paid by employers. It is also planning amendments to soften measures affecting pensioners, and the budget ministry has indicated it is open to prolonging temporary tax increases on the richest individuals.
“Barnier will also have to satisfy his own troops and it’s going off in all kinds of directions,” said Francois Ecalle, chairman of public finances think tank FIPECO. “He’ll probably use the 49.3, but it’s not clear on what kind of budget.”
After the senate debate that is set to begin Monday and a possible attempt at reconciling different versions at a parliamentary commission with seven senators and seven lawmakers, the bill will return to the National Assembly in early December. To give time for review by the Constitutional Council and promulgation of the law before the beginning of 2025, the parliament must have adopted the bill by mid-December.
If the budget is rejected at that stage — by a vote or a successful no-confidence motion — special bills are possible to get fast-track authorization for the government to continue to collect taxes in 2025 and spend the bare minimum to keep the state functioning month-by-month, according to public law professor Anne-Charlène Bezzina. But that would amount to a harsh form of austerity that nobody is ready to take responsibility for.
“There is too much disorganization for a yes vote on this budget and to avoid the country falling into monthly spending limits, article 49.3 becomes an emergency weapon for France to continue functioning Jan. 1,” she said.
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