CAC Continues Under Pressure as Political Tensions Mount
Finance Minister said on Saturday that the budget had room for improvement as the right-wing RN insists on key elements of the budget.
- RN party maintains demands for concessions
- Minority government may face a vote of no confidence
- S&P keeps French debt rating at AA-
The CAC opened down 1.06% from Friday’s close, after the national budget debate seemed to face further hurdles. French stocks have been under increasing pressure as political uncertainty clouds the investment outlook.
Barnier’s government is attempting to cut €60 billion from the 2025 budget, through tax hikes and spending cuts. But to pass the budget the government needs at least an abstention from the RN party in the vote.
The Prime Minister is facing opposition from both the left- and right-wing parties, each with their demands. Although it seems that the toughest demands are coming from the right-wing RN party.
In a note of relief, S&P kept its French debt rating at AA- on Friday, after government bonds had reached their highst yields in 12 years.
Le Pen Holds Her Demands
Maire Le Pen’s National Rally party has demanded pension increases and avoiding a tax rise on electricity. The minority government has conceded to the latter, allowing the negotiations to continue.
Le Pen isn’t backing down from her demand to increase pensions in line with inflation. A move the government wanted to avoid as it tries to reduce the deficit.
The RN is also calling for cuts in medication reimbursement to be dropped. And a decrease in France’s contributions to the EU, as well as increased taxes in share buybacks and financial transactions.
CAC Live Chart
Increasing Risk of New Elections
Barnier still remains in the balance as the government is under threat of a motion of no confidence vote in the case RN’s demands are not met. Should the vote take place the government is very likely to lose, leading to a new round of elections.
On Saturday, Tanguy, a RN party member of parliament told the Les Echos newspaper that they would back a motion of no confidence should the government not change the budget bill.
While the finance minister Armand said over the weekend that the budget had room for improvement.
“This government, under his authority, is willing to listen, to have a dialog, to be respectful, to improve this budget,” Armand told journalists.
The call for a no-confidence vote could come as early as today, if the government uses a constitutional feature to force the social security bill through parliament.
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