How did France get to this point?

After a shellacking for his centrist Ensemble (“Together”) Movement in the June 2024 European Parliament elections, French President Emmanuel Macron decided to call snap legislative elections to try to stabilize the domestic political situation. But Macron’s gamble that French citizens would reward him with a new majority and fresh mandate backfired, and he ended up with a “hung” National Assembly divided between three roughly equal and politically incompatible factions.

Macron appointed the center-right Michel Barnier as prime minister in September with the goal of quickly passing an austerity budget to rein in France’s growing fiscal deficit. By early December, it was clear that Barnier could not muster enough parliamentary support for his budget, and the far left and the far right teamed up to bring down his government.

On December 13, Macron appointed one of his earliest political allies, the seventy-three-year-old centrist François Bayrou, as the new prime minister, with essentially the same task he gave Barnier back in September. Now the main question hanging over French politics is: Can Bayrou succeed where Barnier failed, since he faces the same parliamentary gridlock?

What issues are driving the country’s increasing polarization?

The issues that are dividing both French elites and the general population are not that different from the ones that we have seen in the United States and the rest of the world: the increasing cost of living, the deteriorating state of public services, higher flows of immigration, and the instability in Europe’s near abroad, including in Ukraine and the Middle East.

Macron and his centrist allies want to continue the structural reforms of the French economy they started in 2017, including improving the climate for doing business, stopping any further tax rises, streamlining the unwieldy French pension system, and steering the European Union (EU) towards closer integration on defense and energy. Both the far left and far right want the wealthy to pay a higher share of taxes, would like to undo Macron’s pension reform by bringing the retirement age back down to sixty, and are more Euroskeptic when it comes to delegating more sovereign powers to Brussels. The far-right National Rally led by Marine Le Pen wants to take more drastic measures against immigration, slow down the clean energy transition, and is skeptical of interventions abroad. The united left-wing New Popular Front, led by Jean-Luc Mélenchon of France Unbowed and by Olivier Faure of the Socialist Party, would like to maintain France’s generous social protections and enact more ambitious measures to fight climate change.

At a time when France’s fiscal deficit stands at 6.1 percent of gross domestic product (GDP), it is hard for these parties to agree on a budget that can both temper public spending and increase revenue through even higher taxes. France’s current public spending already stands at a record high 58.3 percent of its GDP, while its tax collection is about 52.2 percent.

Could the country’s debt situation pose a risk of broader EU contagion?

The current situation in France is nowhere close to the severity of the Greek debt crisis in the first half of the 2010s, when borrowing costs spiraled out of control and Greece almost fell out of the Eurozone. However, the sovereign credit rating agency Moody’s has taken note of France’s political impasse and downgraded the trustworthiness of the country’s debt by one notch from Aa2 to Aa3. This means France is now forced to pay a higher premium on issuing new debt, especially compared to Germany, the bloc’s largest economy.

While contagion of other countries with high levels of debt is possible—including Belgium, which is still without a government, and Italy, which is now racing to finalize its budget—the European Central Bank (ECB) could intervene through its Transmission Protection Instrument (TPI) if it judges any bond market panic unjustified based on the country’s fundamentals. But while that could help Italy, which does have a stable budget and should manage to bring its deficit closer to the EU-recommended 3 percent of gross domestic product (GDP), it will not help France if it cannot show EU and ECB officials that it is indeed serious about curbing its deficit.

To do so, Bayrou will need to form a government that can command enough support in the French National Assembly—all the way from the Greens on the left to the Republicans on the right. It is hard to see how Bayrou can succeed, as he faces the same incompatible demands as his predecessor. Any budget he proposes will either be unacceptable politically or fail to reassure financial markets that France can realistically bring down its level of sovereign debt. By law, new elections cannot be held until the summer of 2025.

What are the implications for French leadership in the EU on issues such as Ukraine or migration policy?

The French Fifth Republic—a semi-presidential system with a powerful president who manages foreign affairs and a prime minister who oversees the budget and domestic policy—was founded by Charles de Gaulle in 1958 to avoid the many weak governments of the Fourth Republic between 1944 and 1958. Since 1958, there have been periods of “cohabitation,” where the president and the prime minister came from opposing political parties, but there has never really been a situation where there was no faction in the National Assembly able to command a majority.

While the domestic situation is chaotic, Macron retains broad powers to conduct the country’s foreign policy. Even as he has been struggling to form a stable government, he has been to Poland to seek support in putting together a forty-thousand-strong European military force capable of protecting the Russia-Ukraine border in the event of a cease-fire. He has also played an active diplomatic role in stabilizing the Middle East after the downfall of former President Bashar al-Assad in Syria. If he were to need extra money to finance initiatives abroad, however, that would have to be authorized by a majority in the National Assembly, but that could always be done on a case-by-case basis.

What does instability in France and Germany mean for Europe’s place on the world stage?

Given Macron’s weakened position and in the absence of a strong German chancellor—the government of Chancellor Olaf Scholz has just collapsed and snap elections will be held in February 2025—there is a leadership void in Europe. It is currently being filled by Ursula von der Leyen, the head of the European Commission, who started her second term in office on December 1, and by Donald Tusk, the Polish prime minister, who takes over the rotating EU presidency from Hungary’s Viktor Orbán on January 1, 2025. Von der Leyen just signed off on a major free trade agreement between the EU and the South American trade bloc Mercosur, which took twenty-five years to negotiate. With former President Donald Trump returning to the White House on January 20, 2025, the European Commission will also play a central role in U.S.-EU trade relations and in pushing for closer coordination in European defense spending.

That said, no progress on European integration since World War II has happened without the strong and explicit support of both France and Germany. In the absence of national leadership in Paris and Berlin, others—such as Italy’s Prime Minister Giorgia Meloni, or Viktor Orbán in Hungary—could be tempted to negotiate directly with Trump, which could stoke growing division in the EU. At a moment when the EU needs to speak with one voice, a cacophonous concert of different national leaders jostling for influence could undermine the bloc, unless Von der Leyen and Antonio Costa, the new president of the European Council, manage to get all EU leaders to sing from the same hymn sheet. It will not be an easy task.

(Source: Council on Foreign Relations)