Families in France were worried about the labor market and the economy in the face of an impending political crisis, which caused consumer confidence to drop to a five-month low in November. The consumer confidence index sank to 90 from a downwardly revised 93 in October, according to statistics agency INSEE. This is the lowest level since June, when morale plummeted after President Emmanuel Macron’s proposal for a quick parliamentary election, and far below the long-term average of 100. On average, Reuters polled economists who predicted that household confidence would reach 93 points in November.
Economic indicators and trends
The far-right National Rally Party in France has increased its threats to support a motion of no confidence to topple the country’s minority-led government if its demands are not met by the final version of the budget bill that is now being considered by parliament. French bond risk premiums have increased due to the financial markets being shaken by the political turmoil. According to the study, consumers’ worries about the overall state of the economy were at their highest levels since October 2023, when families were still dealing with the effects of an inflation shock. Unemployment worries also soared, hitting their greatest level since May 2021, when COVID was hammering the second-largest economy in the eurozone. On average, Reuters polled economists who predicted that household confidence would reach 93 points in November. The far-right National Rally Party in France has increased its threats to support a motion of no confidence to topple the country’s minority-led government if its demands are not met by the final version of the budget bill that is now being considered by parliament. French bond risk premiums have increased as a result of the financial markets being shaken by the political turmoil.
Impact on household spending
Consumers’ worries about the overall state of the economy were at their highest levels since October 2023, when families were still dealing with the effects of an inflation shock.
Unemployment worries also soared, hitting their greatest level since May 2021, when COVID was hammering the second-largest economy in the euro zone. After negotiations with Prime Minister Michel Barnier failed to meet her party’s demands for budget concessions, far-right leader Marine Le Pen threatened Monday to overthrow France’s coalition government in a no-confidence vote. After the talks, Le Pen said that nothing had changed and expressed doubt that a deal on the 2025 budget plan that tightened the belt could be achieved.
Government response to concerns
The premium investors who want to own French bonds over German ones flirted with highs not seen in more than 12 years, reflecting the increased possibility that Barnier’s government may collapse. Following its rejection by National Assembly legislators after leftist politicians significantly amended the plan in the lower house, adding tens of billions of euros in tax rises, the Senate began discussing the package on Monday. Barnier’s administration is under pressure from opposition parties over the budget, and his tenuous alliance depends on Le Pen’s National Rally Party for covert backing. Through tax rises and expenditure reductions, the government hopes to save 60 billion euros ($62.85 billion) to lower the deficit from above 6% of GDP this year to 5% next year. If its demands are not fulfilled, the National Rally has stated that it will back attempts to overthrow the government. Le Pen stated last week that her party is against raising taxes on individuals, businesses, or retirees and that the budget plan has not yet taken these requests into account.
The future outlook for consumer morale
After giving conservative parliamentarians pension concessions and giving several departments significantly larger budgets in response to their complaints, Barnier is already having difficulty keeping the 2025 budget inside the government’s deficit objectives. Laurent Saint-Martin, the budget minister, said that the budget deficit may be a little larger than the initial projection of 5% of production. There have been rumors that Barnier may use Article 49.3 of the Constitution, which permits the text to be enacted without a vote, as a result of his difficulties getting the budget approved. A motion of no-confidence against the government may be triggered by such a move.
“It is true that we find very little quality in this budget and very little time for the government to try to increase its qualities and reduce its defects,”
Le Pen stated. Barnier’s discussions with Le Pen were characterized as “constructive, courteous, and frank” by an official in his office. To get an agreement on the budget plan, Barnier was also scheduled to meet with other party leaders. On December 12, the Senate will vote on the entire budget.
