Le Pen takes France and Europe into the unknown

By Lionel Laurent

France is doing a better job at protecting its monuments than the functioning of its democracy. Even as Notre Dame cathedral rises from the ashes as a symbol of unity in adversity, Europe’s No. 2 economy faces unprecedented instability after far-right leader Marine Le Pen’s teaming-up with the left to topple Michel Barnier’s government and torpedo his budget. At a time when the entire region is vulnerable to Donald Trump’s trade barbs and Vladimir Putin’s war machine, this is a journey into the unknown that the West doesn’t need.

The parliamentary chaos lays bare the wreckage of France’s political landscape after successive pandemic and inflation shocks and the end of a strong run of economic growth and job creation. Barnier’s belt-tightening plan to lower the French deficit with €60 billion ($63.2 billion) in savings was never going to be a crowd-pleaser, yet it’s a shock to see how easily it was taken hostage by politicians more interested in presidential elections in 2027 than budget math. By imposing “red lines,” demanding more anti-austerity measures and bringing down Barnier after just 89 days in charge, Le Pen has landed a symbolic punch on the elites in power but without offering any genuine answer to deep demographic and productivity decline.

Those red lines of the far right will now effectively tie President Emmanuel Macron in knots as he tries to fill the void with a new prime minister and restart the arduous journey towards a functioning budget. France’s parliament is gridlocked with no working majority, reflecting an increasingly polarized society, and no fresh elections are possible until at least the middle of next year. And while ideally the national interest would take priority, with €350 billion of debt and €40 billion of interest payments falling due next year, the tantalizing prospect of power in a winner-takes-all system will keep politicians looking for easy wins and high-stakes gambles. If this snowballs into greater social anger or unrest, Macron’s own job is at risk.

Financial markets are taking the mess in their stride for now, which is fair enough — this isn’t a Greek or Italian-style euro crisis. The Fifth Republic’s institutions offer ways to keep the state functioning in an emergency, all helped by the support of the European Union and the euro —which is ironic considering Le Pen’s failed “Frexit” campaign to dump the single currency. There’s also a Notre Dame effect at work: France’s national wealth worth over 680 per cent of gross domestic product is a reassuring long-term counterbalance to its current debt pile and political volatility.

Still, the combination of rising implied borrowing costs on the market and emergency month-by-month government spending approvals is a painful one. It could bring untargeted fiscal austerity, as Bloomberg Economics points out, socking the economy without reassuring investors worried about debt trajectory in the long term. There is a huge risk of slow-burn corrosion burrowing deep into institutions and society: It’s hard to imagine that dirigiste France can fire on all cylinders with so much paralysis on the way, and investment and growth are likely to suffer. Le Pen’s apparent victory in the name of French purchasing power risks being entirely Pyrrhic.

And as one of Europe’s foremost geopolitical voices and the EU’s only nuclear power, France’s fading influence is as palpable as it is badly timed. Trump’s return to the White House and the prospect of a peace deal with Putin over the heads of Ukrainians need a stronger Europe more able to defend itself. Germany’s own government coalition is falling apart, though with more optimism on what comes next than in France. The UK, which now looks eminently more stable than during its Brexit basket-case days, is about to come under huge pressure to choose between Europe or the open sea, as Winston Churchill put it. If Macron can’t bring France together and focus the country on fixing its own problems, Notre Dame’s glorious reopening may be all that remains of his legacy.