France is facing a looming “financial crisis” and potential economic downturn following the unexpected triumph of a hard left coalition in the recent elections, as cautioned by the departing finance minister Bruno Le Maire.
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Providing insight on the political landscape, banking specialist Bob Lyddon from the UK has expressed to Express.co.uk that the election outcome signifies a shift away from Emmanuel Macron’s strategy of “managing debt and government expenditures”, highlighting the impending “stalemate” as a concerning development comparable to a win for Marine Le Pen’s far-right National Rally.
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In a potential foreshadowing of upcoming unrest, clashes erupted between riot police and left-wing demonstrators in Paris on Sunday evening. The situation escalated quickly, highlighting the growing tensions within the city and the country as a whole.
The newly formed Popular Front (NFP), led by prominent left-wing figures such as Jean-Luc Melenchon, has put forth ambitious plans to boost public spending by £125 billion if they manage to secure power. Additionally, they are proposing a significant 90 percent tax on incomes exceeding £340,000 annually, a move that has sparked debates and concerns about the economic implications.
Finance Minister Le Maire has expressed reservations about the proposed tax increase, warning that it could potentially cost the country more than £250 billion. With France already grappling with a budget deficit of 5.5 percent, such a substantial financial burden could further exacerbate the existing economic challenges and potentially lead to a financial crisis and economic downturn.
The implementation of the New Popular Front’s disruptive agenda could potentially undo the progress made through policies pursued over the past seven years.
This particular initiative is not only costly but also inefficient and outdated. Its credibility is questionable and largely dependent on specific circumstances. Therefore, it is advisable to avoid its implementation altogether.
Prior to the elections, financial experts noted a significant rise in affluent French individuals contemplating relocation to countries like Italy, Switzerland, and Spain. Should the New Popular Front manage to enforce a 90 percent tax rate, the likelihood of this trend intensifying is high.
The founder of Lyddon Consulting Services, Mr. Lyddon, expressed his views on the situation in France, stating that the country has created a deadlock for itself. He also mentioned the potential emergence of a deadlock in the European Parliament.
Mr. Lyddon further added that predicting the outcome in France is challenging, especially with the conflicting views of the main political parties. While Macron’s direction focuses on controlling debt, public spending, and increasing the retirement age, other parties are advocating for more spending, indicating a potential shift in policies.
A stalemate is just as undesirable as the chaos that could have ensued if Marine Le Pen had emerged victorious. France’s financial obligations are calculated to be more than 110 percent of its GDP, not factoring in its responsibility to repay the EU’s debts from the €750 billion Coronavirus Recovery Fund, or its guarantee of €87 billion for the euro bailout scheme through the European Financial Stability Facility.
Regarding the potential outcomes for the NFP, he emphasized that it seems unlikely for them to secure a majority in parliament to back the necessary measures.
It is more probable that the situation will result in a continuous cycle of discussions without any concrete actions being taken. Concerns about the possibility of an NFP government are shared by others in France, such as Jean-Eudes du Mesnil from the CPME small and medium businesses union, who expressed doubts about the feasibility of certain proposed measures.
Gabriel Attal, whose resignation offer was rejected by Mr. Macron ahead of the Paris Olympics, took to Twitter to express his stance. In a tweet, he stated, “We will consistently reject succumbing to radical views.”
Furthermore, he emphasized, “Our aim is to pacify those who aim to stoke tensions and cater to the agendas of populists, polemicists, and communalists.” Attal concluded by affirming, “We will continuously strive to meet the high expectations of the French people.”
“We will always remain true to our values. ”
“We are ready to rebuild everything. Because we are France and nothing can resist the French people.”
France’s National Assembly does not have a single party that holds a majority, as NFP has secured 182 seats, Mr Macron’s centrist Ensemble alliance has won 163 seats, and National Rally has won 143 seats.
Regardless of the outcome, Mr Macron will continue to serve as President, but he may potentially be entering a period of two years as a lame duck.
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