Debates over France’s budget collapse, casting uncertainty on the government’s continued existence

A day after Socialist party leaders halted their participation in protest over Prime Minister Francois Bayrou’s comments about immigration, endangering the survival of his government, French budget talks teetered on the verge of failure on Wednesday.

The controversy over Bayrou’s remarks that many French citizens feel “submerged” by immigration highlights how difficult his political balancing act is.

Far-right MPs from the National Rally, the biggest party in parliament, applauded his remarks, but the Socialists withdrew from budget negotiations, endangering the bill’s approval and casting further doubt on Bayrou’s administration’s viability.

As the 2025 budget measure approaches its final stage, the Socialists’ strike occurs at a critical juncture. Before it moves to the lower house floor on Monday, a small group of senators and lawmakers are expected to hammer out a final draft on Thursday.

In an interview with Sud Radio on Wednesday, Philippe Brun, a Socialist politician participating in the budget deliberations, stated, “We suspended our negotiations because the words from the prime minister were not dignified.”

If Bayrou took back his immigration comment, Brun added, the Socialists might go back to the table. The premier has no such intentions, according to government spokesman Sophie Primas, and the budget shouldn’t be “taken hostage” by the conflict. She responded that talks were still going on, and Brun expressed his hope that they would pick up again.

Investors have already been alarmed by the 2025 budget’s failure, which has also damaged family and corporate confidence. To create a law that has a chance of passing, the administration has had to give billions of euros in concessions.

Without a majority, the administration might circumvent legislators by using constitutional powers, which would probably lead to opposition MPs calling for a vote of no-confidence.

The administration has previously backtracked on many budget cutbacks to appease the Socialists, and it was depending on their abstention to survive a possible no-confidence vote.

In an attempt to avoid becoming like his predecessor Michel Barnier, Bayrou was appointed prime minister in December. When Barnier attempted to approve a budget that members believed went too far in an attempt to reduce spending, politicians from both the left and the right united to overthrow his administration.

Bayrou has tried to survive with the help of the Socialists, whereas Barnier had looked to the National Rally for assistance. In addition to abandoning his predecessor’s intentions to lay off thousands of teachers, he has agreed to resume discussions on pension reform, a major objective of President Emmanuel Macron.

Bayrou has so far escaped one no-confidence motion that was opposed by the Socialist party. However, Brun stated that if the Socialists were unable to reach a consensus on the budget, they would think about supporting another vote of no-confidence.

In an interview with BFM TV, another Socialist MP, Laurent Baumel, claimed that the administration had not gone far enough. He said that among other things, socialists demanded greater funding for the green transition and an increase in the minimum wage.

The flare-up elicited little response from the market. The premium that investors demand to keep French paper is reflected in the difference between the rates on French and German 10-year bonds, which was around 1 basis point larger on Wednesday at 73 bps.

But this year, the difference has been closing, having been over 80 basis points in mid-January and 90 in late-November.