Economic impact of French political turmoil seems limited and contained- EU

Lawmakers vote on no-confidence motion against the French government

French Prime Minister Michel Barnier reacts after the result of the vote on the first motion of no-confidence against the French government, tabled by the alliance of left-wing parties the "Nouveau Front Populaire" (New Popular Front - NFP), after the use by French government of the article 49.3, a special clause in the French Constitution, to push the budget bill through the National Assembly without a vote by lawmakers, at the National Assembly in Paris, France, December 4, 2024. REUTERS/Sarah Meyssonnier

Source: REUTERS

The economic impact of political turmoil in France on the rest of the European economy seems contained and rather limited, but the European Commission is monitoring it, a spokesman for the EU executive arm told a regular briefing on Thursday.

The risk premium investors demand to hold French debt rather than German Bunds dropped on Thursday after the widely expected collapse of the French government.

"We follow very closely what is gong on in France," Commission spokesman Balazs Ujavri told the briefing. "What we see for now is that the economic effect is rather contained and limited. The macroeconomic situation in France remains stable."

Far-right and left-wing lawmakers joined forces early this week to back a no-confidence motion against Prime Minister Michel Barnier.

Analysts fear France would enter a slow-burning crisis that could lead to a deterioration of sovereign creditworthiness and less economic growth.

"We know that in the French constitution there are measures for scenarios in which we get to the end of the year and there is no budget," Ujvari said, referring to the roll-over of the 2024 tax and spending structure being rolled over to 2025.

This article was produced by Reuters news agency. It has not been edited by Global South World.

By Reuters