(Bloomberg) -- French Prime Minister Michel Barnier used a constitutional tool to push through parts of his unpopular budget bill without a parliamentary vote, raising the prospect lawmakers could dissolve his government within a matter of days.
The premier declared at the National Assembly on Monday that he would use Article 49.3, which allows for the adoption of the social security bill without a vote, but opens the door to no-confidence motions. A left-wing party said it would file a no-confidence motion imminently.
Far-right leader Marine Le Pen said earlier Monday that her National Rally would support the no-confidence motion — a move that would ensure its passage — if Barnier didn’t agree to her final demands.
The uncertainty has pushed bond investors to punish France’s sovereign debt relative to its peers, driving up borrowing costs at one point last week as high as Greece’s and leading Barnier to warn of a “storm” in financial markets if he is dismissed from power.
But French assets were volatile throughout the day amid brinkmanship from the political parties. The spread between French and German 10-year bonds initially narrowed sharply, before widening to around 85 basis points, just below the session-high of 87. French stocks traded sideways, erasing most gains after a brief spike when Barnier’s office announced a concession on a key National Rally demand.
Barnier was always likely to need to use the constitutional mechanism, called Article 49.3, to pass the budget because he is far short of having a majority in the National Assembly. But the timing is particularly hazardous for France’s finances as the government must adopt a budget by year-end or use untested emergency legislation to avoid a shutdown.
Opposition groups now have 24 hours to file no-confidence motions. Following that, 48 hours must elapse before parliament begins to debate the proposal and a no-confidence ballot must take place within three days of that.
An abstention by Le Pen in the no-confidence vote would suffice to save Barnier, but she has hardened her position in recent weeks, increasingly complaining that the government was failing to take on board all of the National Rally demands.
If the government is voted down, ministers remain in place with a caretaker status to manage current affairs, potentially including the emergency legislation to avoid a shutdown. It would then be up to President Emmanuel Macron to appoint a new prime minister, although there is no constitutional deadline for his decision.
(Updates with markets from the fourth paragraph.)
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