French Prime Minister François Bayrou faces a September 8 confidence vote on his 2026 budget plan as markets tumble and opposition parties unite against him [Image by Financial Times]
(The Post News) – French Finance Minister Éric Lombard warned that the government will be compelled to drop its deficit-cutting plans if Prime Minister François Bayrou loses a crucial confidence vote next week. The risky showdown could exacerbate France’s political stalemate and shake investor confidence in the euro zone’s second-largest economy.
In an interview with the Financial Times, Lombard said it was “inevitable” that any future government would have to compromise with the left in an attempt to push through any fiscal package. “If by any chance the government falls, on Monday night I would call them,” he said, referring to Socialist leaders.
Bayrou Gambles on Confidence Vote
Bayrou surprised parliament by calling a confidence vote on his tax proposals, scheduled for September 8. His minority government has proposed a €44 billion package of tax measures and spending cuts to reduce the budget deficit from 5.4% of GDP this year to 4.6% in 2026.
The austerity package includes: Scrapping two public holidays, freezing most welfare payments and closing loopholes to raise an additional €4 billion
France’s fate is in the balance,” Bayrou declared, vowing to “fight like a dog” to stay alive. Yet opposition parties from across the spectrum appear determined to bring him down.
The Communist Party rejected compromise, and far-right National Rally leader Marine Le Pen called Bayrou “isolated and irresponsible.” The Socialists, who hold the swing votes, have instead proposed a €22 billion plan based on a new 2% wealth tax on individuals with over €100 million in assets.
“The government will fall,” said Communist lawmaker Stéphane Peu. Socialist leaders joined in, calling Bayrou’s fiscal policy unsustainable.
Investors Sound Alarm Over Finances
The pending ballot has frightened markets. Yields on 10-year French government bonds briefly touched over 3.6% this week, their highest level in over a decade. That brought them close to the price of Italy’s borrowing, a danger signal for investors who once considered France a safer bet.
Fitch Ratings will review France’s AA credit rating on September 12. A downgrade would render the nation’s borrowing more costly.
Bayrou warned that France risks a Greek-style crisis unless it acts decisively. Lombard said he did not agree that the government can “take care of the deficits” without provoking a financial crisis. He reaffirmed that France would meet its target of reducing the deficit to 5.4% this year and to 3% of GDP by 2029, as stipulated in EU rules.
But Lombard also acknowledged that France is vulnerable to market jitters. “We mustn’t imagine that if we’re not responsible, the markets will be indulgent towards us,” he said, pointing to recent warnings delivered against the US and UK for fiscal misbehaviour.
The political deadlock has its origin in the snap election last year, which splintered the National Assembly. Macron’s centrist group lost its majority, and the left-wing coalition gained the most seats without securing an absolute majority. The far-right National Rally also gained, though tactical voting limited its domination.
The result has been paralysis. Bayrou is Macron’s fourth prime minister in just two years, a sign of instability. If Bayrou falls, Macron can attempt to install a new prime minister, leave Bayrou in place as a caretaker, or less likely, call fresh elections. At least for now, the president has ruled out another snap election.
Macron ally and parliamentary speaker Yaël Braun-Pivet admitted the government had mishandled negotiations. “There perhaps should have been a little more dialogue with opposition parties during the summer,” she said. She appealed for compromise, particularly on Bayrou’s controversial suggestion to abolish two public holidays.
Socialist Factor
France’s entire fiscal fate is also in the balance with the Socialists, whose €22 billion compromise proposal for the EU’s 3% deficit target until 2032. Lombard dismissed their offer as too loose but recognized that any finance minister would need to negotiate with them.
“There’s a disagreement on the rhythm and on the size in 2026,” he said. “But that leaves a space for discussion.”
Lombard ruled out the extension of temporary corporate tax surcharges but added that wealth taxes could perhaps remain “on the table” provided they do not trigger capital flight. “In French culture, the symbolic aspect is sometimes more important than the reality,” he stated.
Bayrou’s survival looks increasingly unlikely. The Communists, Greens, and La France Insoumise have rejected his advances, and the Socialists are positioning themselves for talks with Macron’s camp after his demise.
If Bayrou goes, Macron faces a difficult decision: impose a new prime minister on a minority, or attempt a cross-party agreement on the 2026 budget. Both options risk locking in instability as France attempts to reassure investors.
The EU is watching events closely, and Fitch has a review pending, so the outcome of Monday’s confidence vote may determine not only Bayrou’s fate but also France’s credibility in managing its public finances.
About the Author
