France's government, led by Prime Minister Michel Barnier, faces instability as the far-right National Rally, under Marine Le Pen, threatens to withdraw support over a contentious budget bill aimed at reducing the deficit. With a looming vote of no confidence and a budget deadline of December 21, the political landscape remains precarious, especially as Le Pen's ongoing embezzlement trial adds uncertainty to her party's actions. The government, reliant on National Rally's backing, risks further chaos if the budget is pushed through without concessions.
The Bank of France forecasts zero growth for the economy in the fourth quarter, following a boost from the Paris Olympics in the previous months. While underlying activity is expected to increase slightly, the comparison with the third quarter will reduce expansion by 0.2 percentage points due to ongoing political uncertainties.
The election of Donald Trump as the next US president introduces risks and uncertainty for the global economy, according to Bank of France Governor Francois Villeroy de Galhau. His policies are expected to increase deficits and elevate long-term borrowing costs, prompting Europe to confront its economic vulnerabilities.
Francois Villeroy de Galhau, a member of the European Central Bank's Governing Council, emphasized the need for agility in interest-rate decisions to avoid lagging behind economic trends. He noted that while inflation remains a concern, the risk of falling below the 2% target is equally significant, particularly if growth continues to be weak. Current projections suggest inflation may reach this target by early 2025.
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