AP
The French parliament fails to pass the budget. Foreign investors have almost all scattered.
Since the 19th century, Marianne, the symbol of France, has been no less important than the slogan «Liberty, Equality, Fraternity». The image of this woman, one of the iconic emblems of the French Revolution, has been sculpted after Brigitte Bardot, Mireille Mathieu, Catherine Deneuve or Inès de la Fressange — aren’t there many beauties? But since July, following Macron’s historic decision to dissolve parliament, no amount of beauty can rekindle foreign investors’ interest in France.
In France, there’s an entire research institute, EY, that acts as a barometer measuring the country’s attractiveness index for foreign capital. As the National Assembly plunges into debates on the 2025 budget, it’s clear that things aren’t going to end well. According to the institute, 50 percent of investors have already withdrawn their activities from France in anticipation of an extremely unstable economic situation. EY bases its conclusions on surveys of the 200 largest investors in the French economy.
In general, the government of Prime Minister Michel Barnier presented a rather harsh budget to parliament, proposing to cut spending by 40 billion euros and raise taxes on the wealthiest companies by 20 billion. About 300 of the country’s largest companies are expected to face additional taxation. Overall, it seems like a reasonable move. However, industrial giants such as Auchan and Michelin are already reducing production and laying off thousands of workers.
The results of the parliamentary elections left no bloc with an absolute majority, and the atmosphere in the National Assembly resembles a terrarium without food. Sometimes, after the debates, it seems that no one is interested in the budget itself, but only in outdoing the opponents and acting out of spite. In any case, Marine Le Pen’s party «holds the cards» in parliament, and the fate of Barnier’s cabinet now depends on whether her group supports a vote of no confidence in the government.
Well, so be it. They’ll pass the budget in the end, even if they have to sacrifice the government — which, let’s not forget, was put together with great difficulty. But such calculations don’t satisfy investors.
«Foreigners have reacted very strongly to our ongoing debates», says Xavier Ragot, president of the French Economic Observatory. «We found that 84 percent of the strategic decisions planned by foreign investors for 2024 have been postponed to next year, and probably even further. This indicator alone is costing our country 0.1 percent in economic growth».
Things have almost reached the point of embarrassment. There was a moment when 10-year French government bonds became more expensive than Greek ones! This means that the level of confidence in the French treasury has fallen below that in the coffers of the descendants of Hellas. Recall the infamous Greek crisis in the European Union, when Sarkozy was shouting all over Brussels that the Greeks had falsified documents when they entered the eurozone — they shouldn’t have been there at all — and now everyone is chipping in to cover their expenses. A simple employee of the Greek railways somewhere in Thessaloniki earns up to 5,000 euros, while a humble member of the European Parliament toils away in dusty Brussels for a meager 6,300.
«I now predict a financial storm», said French Prime Minister Michel Barnier in an interview with France’s leading television channel TF1. «Our country’s debt on the global financial markets has reached 3,228 billion euros, but the main problem is that it is costing us more and more to service it».
France lost its AAA credit rating in 2012, and things haven’t gotten any better since then — hence the skepticism toward the country. If nothing changes and the French parliament doesn’t approve Barnier’s budget, it will cost France 60 billion euros a year now, or 72 billion by 2027. This means that servicing the foreign debt will become the largest item in the state budget, pushing education spending into second or third place.
«In reality, France’s foreign debt is secured and liquid. I would even say that these government bonds are bought and sold very quickly and easily, and I don’t see any problems», says Aurélien Buffault, director of the Delubac Asset Management investment fund. «In fact, France is on the edge of a cliff and seems to be looking down, but the structural analysis shows that it remains and will continue to remain on the list of wealthy nations».
The best advice on how the French can make money came, as expected, from across the Channel. This should probably be taken as a joke, or perhaps a friendly Anglo-French jab, an exchange that has been going on since the burning of Joan of Arc by an English court decision.
«According to the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA), France has the highest level of cannabis consumption in Europe and the strictest laws to combat it», writes the British newspaper The Guardian. «So just legalize this herb, at least for recreational purposes, tax it and end the debates. You French will benefit even more».
Apart from the British jokes — not understood by all — there are serious considerations from the French Economic Observatory. At the moment, it lacks a more or less clear development perspective for the country over the next five or even seven years.