Successful no-confidence vote: what’s next for France?

The successful no-confidence vote let France without a government until the nomination of a new Prime Minister by the President. President Macron can choose a new Prime minister in a short period of time and the press hint ed that this would be his preferred option. But a s no time-limit is set, France can be without an official government for a while. In the mid time, a care-taking government would oversee the current affairs until a next government is formed or until new snap elections next summer. Considering the current circumstances, we continue to believe that France will have a budget for 2025, but not necessarily by the end of 2024 . To ensure a budgetary continuity, France has several options stated in the c onstitution despite some uncertainties regarding their effective applications . W e think the most likely outcome remains a special bill to ensure the ongoing flow of state expenditures and revenues in 2025 until a vote of a “ full ” budget in 2025. We believe the use of the Article 16 to pass the budget , that gives emergency powers to the President (designed for war time s ) , remains unlikely . In any case, political instability could remain high until at least next July at which point that the President can call for new snap elections, with the risk of a new hung Parliament. Regarding the public deficit , a mechanical roll-over of the 2024 budget will imply some consolidation efforts ( no re-indexing of the income tax scale , freezing of all expenses not indexed by law to inflation , etc.) and some extra-spending (removal of spending cut and tax increase planned in the 2025 draft budget law such as partial retirement pension re-indexation, temporary tax increase on big companies and on the “wealthiest” households, etc.).