Budget will be a major test for new French government

Significance

Barnier says he will appoint his cabinet next week. The cabinet must be then approved by parliament. Barnier’s government will not have a parliamentary majority and will depend on the far-right National Rally (RN) to implement legislation and survive censure motions.

Impacts

• Persistent political uncertainty will continue to undermine investor confidence in the economy.
• If Barnier’s government collapsed early, the chances of presidential elections before 2027 would increase substantially.
• Barnier’s government will likely be supportive of the EU’s tariffs on Chinese electric vehicle imports.