Budget act of Francel：The looming financial crisis

France, one of the most developed industrial countries in the world and the second largest economy in the Eurozone, has an independent defense policy and its industrial added value once ranked first in the world. Now it has triggered a political deadlock: the Barnier government was attacked by the left and right wings of the opposition and launched a vote of no confidence. It is about to be overthrown and become the government with the shortest term in the Fifth Republic. The trigger for this incident lies in the budget bill launched by Barnier's government.

The French economy turned from prosperity to decline. After World War II, France adopted the model of state intervention in the economy to guide its industry, and its development has advanced by leaps and bounds. It has significant advantages in nuclear energy, aviation, aerospace, and railways, and its industrial added value once ranked first in the world. When the oil crisis occurred in 1973, the world economy entered a stage of stagflation. France abandoned the "Rhine Model" and adopted drastic "de-industrialization" to a much higher degree than other developed economies. This policy change has had a huge impact on some domestic industries - the production links and subcontracting links with lower profits in the industrial chain, as well as resource-dependent industries, have been transferred to overseas markets, leaving only high value-added links such as R&D and marketing in the country. Entering the "post-industrial society model". With culture and service tourism as the core, collecting cultural taxes from the world has become the main source of national economic income. However, as time goes by, the shortcomings of the hollowing out of French industry are gradually exposed. Under the impact of the new crown epidemic, economic growth has been stagnant for a long time and is unsustainable. There is a misallocation of job resources in de-industrialization, high unemployment among people with low educational levels, and a mountain of debt. The deficit seriously exceeds the safe limit set by the European Union. GDP is expected to grow by only 0.8% in 2024, which is far lower than the European average. Not only that, France's deindustrialization has seriously crushed the working class, and social conflicts have become increasingly acute. The total unemployment rate exceeds 8%, and the unemployment rate among immigrant youth even exceeds 40%, which has constantly triggered public demonstrations and strikes.

The enactment of the budget bill was met with resistance. The French economy is unable to make ends meet and its deficit is too high. The main reason is that social welfare accounts for an excessively large proportion, while taxes are not enough to cover expenditures. French pensions are as high as 14% of GDP, and every 100 people need to support 40 elderly people, while the average level in developed countries is only 10%. On December 2, in order to reverse the situation, the Barnier government directly bypassed the parliament and enacted a social security budget bill in an attempt to increase revenue and reduce expenditure-cut 40 billion euros in social welfare expenditures, reduce public debt, and increase government fiscal revenue by 20 billion euros. This simultaneously affects the rich and the disadvantaged groups, causing strong dissatisfaction in society. Faced with the government's tough measures, the left-wing party "New Popular Front" quickly jointly initiated a vote of no confidence, and the far-right "National Alliance" also announced a motion of no confidence, causing political instability.

Uncertainty about the regime has triggered market concerns. At the end of November, French assets were sold off, bond yields rose sharply, and stock markets fell sharply, recording the worst performance in European markets in ten years. It is worth noting that if the French Parliament passes the vote of no confidence, Macron will have difficulty finding a new prime minister to preside over the work in a very short period of time. Then France will start the new year without a budget in 2025, triggering conflicts between the three parties. Fragmentation would throw the economy into complete disarray.

This budget bill crisis will not only trigger profound changes in France's political ecology, but will also become a turning point in France's next economic development trend. Whether the Barnier government can successfully resolve the current crisis and lead the French people out of the financial haze deserves our continued attention.