Macron names former Brexit czar Barnier as France’s new premier
The appointment is a first step toward ending months of political uncertainty after snap elections in June
FRENCH President Emmanuel Macron picked Michel Barnier as prime minister, entrusting the European Union’s former Brexit negotiator and senior conservative figure with the delicate task of marshalling critical finance Bills through a fractious parliament that could quickly topple the new government.
The appointment is a first step towards ending months of political uncertainty in France, after snap elections called in June delivered a National Assembly where no group has the majority required to govern alone.
French equity benchmark CAC 40 trimmed its losses after the news, still down 0.4 per cent on the day. The index was down 0.8 per cent shortly before the announcement. Banking stocks were the biggest gainers, with Societe Generale up 3.6 per cent and BNP Paribas up 2.7 per cent.
In Barnier, the French president has opted for someone who has largely avoided the bickering of frontline politics in recent months, giving him a chance of not being too objectionable for any party.
The leftist New Popular Front alliance had made a claim to lead the new government after winning the most seats, but Macron said their candidate, Lucie Castets, would have been immediately ejected in a no-confidence vote by opposition lawmakers.
In recent days, Marine Le Pen’s National Rally has emerged as a kingmaker in the negotiations, warning it would censure many of the other political figures whose names were touted for prime minister. But officials from the far right were more nuanced on Barnier, saying they could wait to see what policies he proposes.
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“This appointment comes after an unprecedented cycle of consultations during which, in accordance with his constitutional duty, the president ensured that the prime minister and the government to come would meet the conditions to be as stable as possible, and give themselves the chance to bring together the widest possible spectrum of people,” Macron’s office said.
Barnier faces the immediate challenge of forming a Cabinet that can bridge the ideological rifts between the left, right and centrist blocs in parliament. Achieving a balance will be crucial to his ability to withstand no-confidence votes to smoothly adopt a 2025 budget in the coming weeks. Opposition parties in France have a tradition of voting against finance Bills whatever the circumstances.
To avoid a majority of lawmakers uniting against him, Barnier must also find a way to navigate demands in other key policy areas, including pensions and the minimum wage. A broad array of parties campaigned in the legislative elections on pledges to at least partly undo Macron’s 2023 law raising the retirement age, and increase household incomes through measures such as tax cuts and increasing the minimum wage.
Macron’s centrist group, however, has vowed to resist efforts to unpick his pro-business reforms of the last seven years.
Financial markets are closely watching the political gymnastics in Paris. Even before the election in June, France’s budget was in the spotlight after the deficit swelled to 5.5 per cent of gross domestic product in 2023, prompting S&P Global Ratings to downgrade the country and the EU to instigate a procedure to enforce greater fiscal discipline.
When Macron dissolved the National Assembly in June after getting trounced by the far right in EU elections, investors dumped French assets as they saw the risk of opposition parties triumphing and implementing costly manifesto pledges that risked further inflating the country’s debt.
The premium France pays on 10-year debt compared with Germany’s surged and remains well above pre-election levels, while French stocks are yet to recover losses in comparison to the rest of the EU.
Barnier will inherit a blueprint for the 2025 budget from the outgoing caretaker government, with unchanged caps on spending that aim to help France meet a target to narrow its deficit below 3 per cent of economic output by 2027.
But the prime minister’s new team will have a free hand to make changes before presenting the Bill by the start of October. France is also due to send medium-term fiscal plans to Brussels later this month under the EU’s revamped fiscal rules. BLOOMBERG
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