Is France Sliding into an "Italian-Style" Crisis? Prime Minister Faces No-Confidence Vote as Political Turmoil Intensifies

In the European Union, there is a country burdened with massive debt, rising borrowing costs, and a government that collapsed within just a few months. But it is not Italy—it is France.

If French Prime Minister Béru loses the September 8 no-confidence vote due to his efforts to curb the national budget deficit by cutting 44 billion euros (about $51 billion), he will become the fourth head of government to lose his position within a year and a half.

The high turnover rate in the Prime Minister's office was once rare in France, a cornerstone country of Europe whose political system is designed to foster stable governance. However, in recent years, France has entered a vicious cycle: the worsening public finances are exacerbating political fragmentation, which in turn hinders the country from making tough decisions on how to resolve its fiscal mess.

It is widely expected that Béru will not survive the no-confidence vote, which will force President Macron to appoint a new prime minister to form the next government. But last week, Béru urged lawmakers to unite behind him, calling it "a matter of life and death for our country."

The more ungovernable France becomes, the more investors push its borrowing costs up to levels familiar to Europe's heavily indebted peripheral countries. Currently, the yield on France's 10-year bonds has surpassed that of Greece, and its borrowing rate is now on par with Italy.

During the regional debt crisis of the 2010s, Greece and Italy cut their budget deficits through painful austerity measures. Now, after nearly three years in power, Meloni is on track to become one of the longest-serving prime ministers in Italy's postwar history.

For France, escaping this spiral is difficult because its lower house, the National Assembly, has splintered into multiple factions, each with opposing fiscal priorities and enough votes to shift the balance of power.

A series of left-wing parties do not want any cuts to France's welfare state, which accounts for 65% of public spending. Centrist lawmakers allied with Béru and Macron, as well as a group of establishment conservatives, want to increase military spending to counter Russia without raising taxes. Meanwhile, far-right lawmakers like Le Pen argue that the government should cut spending by reducing immigration and payments to the EU.

After Macron was first elected in 2017, he introduced sweeping tax cuts but did not make similar reductions to the costs of France's healthcare, education, and other public services, laying the groundwork for the current predicament.

He abolished the wealth tax and housing tax, lowered corporate taxes, and implemented a flat rate on capital gains. Taken together, these measures meant that by 2023, France was deprived of 62 billion euros in annual tax revenue, accounting for 2.2% of GDP.

The tax cuts helped make France one of the most attractive destinations for foreign investment in Europe, and the unemployment rate fell to 7%, the lowest level in decades. Economic growth initially rebounded, helping to fund the tax measures, but then a series of crises struck. The violent "Yellow Vest" protests swept the country, prompting Macron to spend 17 billion euros to appease the demonstrators.

Xavier Timbeau, an economist at OFCE, a Paris-based state-funded economic observatory, said, "Macron's policies created a strong sense of 'injustice,' seen as aimed at cutting taxes for the wealthy and corporations."

Measures to cushion the impact of the COVID-19 pandemic cost another 41.8 billion euros. Then, the Russia-Ukraine conflict broke out, driving up energy prices, and Macron responded with 26 billion euros in energy subsidies.

By then, France was deeply mired in trouble. Debt rose from 2.2 trillion euros before Macron's election to 3.3 trillion euros, and economic growth stagnated. Macron refused to raise taxes and struggled to cut welfare spending. He succeeded in raising the retirement age to 64 by 2030, which is expected to save 17.7 billion euros that year, but only after a fierce battle with opposition parties and widespread protests.

Last year, France was forced into a series of embarrassing revisions to its budget deficit. The national statistics agency raised France's 2023 deficit to 5.5% of economic output, while the government's forecast was 4.9%. Weeks later, the government had to revise its 2024 deficit forecast, raising it from 4.4% to 5.1% of economic output. Ratings agency S&P responded by downgrading France's rating. Conservative lawmakers threatened to help topple the government if it did not do more to rein in spending.

One of the most significant moves of Macron's tenure was to preempt parliamentary battles by dissolving parliament and calling early elections, but this led to an unprecedented split in votes in the National Assembly. Without a clear majority, any piece of legislation, including the annual budget, became a referendum on the government.

The first prime minister Macron chose after the election, the conservative Barnier, quickly fell in a no-confidence vote. Béru took over at the end of last December and, by temporarily raising corporate taxes, managed to pass a belated 2025 budget.

He soon began warning parliament that to reduce the 2025 deficit, which is expected to reach 5.4% of GDP this year, deeper sacrifices would be needed. After failing to negotiate changes to Macron's pension reform, he lost the support of the Socialist Party.

Then, Béru angered the nation with a plan to boost economic output by canceling two national holidays—Easter Monday and May 8, which commemorates Nazi Germany's surrender to the Allies.

Jordan, leader of the far-right National Rally, denounced the idea as "a direct attack on our history, our roots—on the working people of France."