The euro is affected this Monday in the face of the tense political situation in France. The National Rally (RN) announced on Monday its intention to vote on the motion of censure that the left could table this afternoon on the very sensitive Social Security budget. Particularly if the government of Prime Minister Michel Barnier used article 49.3 of the Constitution to have it adopted without a vote.
In this context, around 12:40 p.m. (Paris time), the European currency fell by 0.49% against the greenback, to 1.0527 dollars, and lost 0.38% against the British currency, to 0.8276 pence for one euro.
Budget: “The government will fall”
Examined from 3 p.m., the text of the Social Security budget should not be voted on by either the left or the far right, in a divided Assembly, where the presidential camp does not hold a majority. After having, among other things, obtained that the government reduce state medical aid (AME) for undocumented immigrants, the RN demanded new concessions, such as the revaluation of retirement pensions.
More “the government has expressed its wish not to modify the PLFSS (bill on the financing of social security), this is extremely clear and we have taken note of this”the president of the RN group in the Assembly, Marine Le Pen, told AFP on Sunday.
“The National Rally will activate the voting mechanism of the weapon of censorship, except obviously, last minute miracle, if Michel Barnier were to review his copy by 3 p.m. But I have little hope that he will be touched by grace”, declared the party president, Jordan Bardella, on RTL on Monday.
Bad news for growth
In an increasingly febrile political climate, the Prime Minister remains “open to dialogue as it has been from the beginning », said those around him. If the government collapses, “this could lead to budget cuts and other austerity measures that could harm economic growth”anticipates Kathleen Brooks, the XTB.
Furthermore, a new election in 2025 could bring the RN to power. However, the analyst doubts that this party will be able to reduce the French public deficit, currently above 6% of GDP.
“Poor economic data and the prospect of significant rate cuts from the European Central Bank (ECB) next year are also adding to the pressure” on the European currency, adds Kathleen Brooks.
The Minister of the Economy Antoine Armand called on Saturday “ each to [prendre] his responsibilities ». « The absence of a budget and political instability would lead to a sudden and substantial increase in the costs of financing French debt », argued the minister during a press briefing the day after France's rating was maintained by the S&P agency.
French debt: markets on the verge of a nervous breakdown
In the event of government censorship, “ our credit would be reached », Estimated for his part the first president of the Court of Auditors, Pierre Moscovici, in an interview with La Tribune Sunday. « When we objectively examine the different scenarios, we see that we must not fall into catastrophism, but neither should we take cheap reassurance “, he continued. Before alerting:
« The cost of our debt is now higher than that of the Greek debt. This degrades our credit and credibility, and could get worse ».
The dollar exceeds the pound
Furthermore, the dollar gained 0.10% against the British currency at 12:45 p.m. (Paris time), at 0.7861 pounds per dollar, supported by recent statements by Donald Trump on his Truth Social network. The president-elect threatened Saturday to impose customs duties “100%” to the nine BRICS countries, including Brazil, Russia, India, China and South Africa, which are considering creating their own common currency to do without the dollar, currently the reference currency for world trade.
“This means that from today, the dominance of the dollar is no longer voluntary, but imposed by the United States”estimates Ulrich Leuchtmann, analyst at Commerzbank. Last week, Donald Trump had already said he wanted to impose customs duties of 25% on all products imported into the United States on Mexico and Canada.
(With AFP)
