French political crisis could threaten Eurozone stability

France has been mired in political turmoil since 2024, with a breakdown of effective governance that now threatens to push the EU’s second-largest economy into crisis.

France is in the middle of a profound political crisis that could have serious repercussions for the European Union’s second-largest economy. On Friday, following consultations with all major political parties — excluding the far-right National Rally and the hard-left France Unbound — President Emmanuel Macron once again asked Sébastien Lecornu, who had resigned a few days earlier, to return as Prime Minister.

He has barely completed a month as Prime Minister. Lecornu was appointed after the governments of EU veteran Michel Barnier and Macron’s close ally François Bayrou were toppled over the past 12 months.

The French political drama is unlikely to come to an end anytime soon. There has been a breakdown of effective governance following the 2024 snap parliamentary elections.

These elections were called in an attempt to secure a clear majority after Macron’s party suffered a humiliating defeat in the European Parliament to the National Rally, which garnered 31% of votes compared to the President’s centrist liberal party’s 15%. Instead, the polls resulted in a hung parliament, with no political bloc securing a clear majority. The ideologically opposed factions are sharply divided and unwilling to cooperate.

Far-right leader Marine Le Pen said earlier, “The joke has gone on for long enough. No one’s laughing anymore.” On the reappointment of Lecornu, France Unbound co-president Jean-Luc Mélenchon remarked, “Macron can do nothing other than be Macron.”

Similarly, National Rally President Jordan Bardella mentioned that “Lecornu II” is “a bad joke, a democratic disgrace and a humiliation for the French people.” Several political figures have stated that they will vote down the new government.

Political parties, including those on the far right, are urging President Macron to call for new elections or even step down from office. He is avoiding new elections, fearing they could further weaken his centrist Renaissance party while boosting the far-right National Rally or the left-wing alliance.

France has a semi-presidential system in which citizens vote separately for the Parliament and the President, and the President appoints the Prime Minister. Normally, the President and Prime Minister belong to the same political party or coalition. However, there have been instances of “cohabitation”, when the President and Parliament represent opposing political factions. In the 1990s, President Jacques Chirac had to govern alongside a socialist-led coalition that controlled Parliament for five years. During such periods, the President’s powers are significantly reduced in domestic affairs. Macron has so far sought to avoid this situation, but now appears to be running out of options. In the process, the far right and, to his surprise, the left have been gaining ground.

In 2024, France’s fiscal deficit rose to 5.8% of GDP, while its national debt reached 114% of GDP — the third-highest in the Eurozone after Greece and Italy. The Eurozone average stands at around 88%, with Germany’s debt ratio close to 60%. France is burdened with a €3.4 trillion sovereign debt and spends about €67 billion annually on interest payments. Since Eurozone fiscal rules set a deficit limit of 3% of GDP and a public debt ceiling of 60%, the French government is under pressure to cut public expenditure. However, Parliament has so far refused to support austerity budgets.

Reducing expenditure will not be easy, as French citizens are accustomed to generous social security benefits. Moreover, the government needs additional resources in light of the war in Ukraine, US President Donald Trump’s call for higher defence spending, the green energy transition, and the need to enhance competitiveness.

Earlier, Prime Minister François Bayrou’s proposed budget, which aimed to cut government spending by €44 billion, was rejected by Parliament. The concern now is that if the debt of a small economy like Greece could plunge the Eurozone into crisis, the consequences would be far more serious if France fails to manage its finances prudently. For now, France can still borrow easily to service its debt, but a prolonged political crisis could have serious repercussions. The French Central Bank chief, however, maintains that although political uncertainty is costing 0.2 percentage points of economic growth, the economy remains stable.

Lecornu now says he accepts being reappointed Prime Minister “out of duty.” He added that he will do everything possible to present a budget by the end of the year. Restoring public finances remains his priority “for our future and for sovereignty,” he said, urging political parties to act responsibly. He also remarked, “All ambitions are legitimate and useful, but those who join the government must commit to setting aside presidential ambitions for 2027.”

The ongoing political crisis and looming economic stress risk undermining both France and President Macron’s ambition to assert leadership at home and across Europe. For years, Germany’s Angela Merkel served as Europe’s de facto leader, and since her departure, Macron has sought to position himself and France at the centre of European influence.

Despite being part of the transatlantic alliance, France’s foreign policy has traditionally emphasised national identity and strategic independence. Macron has been a strong advocate of “strategic autonomy” and “European sovereignty.”

Currently, the transatlantic partnership has been severely strained under the second Trump administration — over tariff disputes and Washington’s direct negotiations with Russia on Ukraine that bypass Europe. As Europeans increasingly discuss building their own defence capabilities and strategic autonomy, this moment could have been Macron’s opportunity to lead. Instead, his weakening domestic position risks turning him into a lame-duck leader.

The fortunes of the far-right National Rally continue to rise with each new political development, underscoring how traditional parties have grown increasingly out of touch with reality. The party is expected to emerge as a frontrunner in the 2027 presidential elections, in which President Macron cannot contest, as the French Constitution limits a president to two terms. Moreover, the traditional cordon sanitaire — the strategy of mainstream parties joining forces to block the far right in the second round — may no longer be effective in the highly fragmented political space of the 2027 French elections.

(Prof Gulshan Sachdeva is Jean Monnet Chair at the Centre for European Studies, Jawaharlal Nehru University)