The waters are closing over Emmanuel Macron’s head. For the best part of a decade, the French president has been a vital presence on the European stage, not just as leader of the European Union’s second-largest economy and preeminent military power, but as the most forceful proponent of deeper European integration to ensure the security and prosperity of a continent caught between an increasingly transactional America and a more assertive China. Yet the political crisis engulfing France leaves both Macron and France itself weakened in ways that will reverberate across the continent.
Macron may have survived the latest political crisis, but his position looks increasingly precarious. A new prime minister appointed on Friday following Sébastien Lecornu’s resignation on Monday – just 14 hours after forming his government – removes the risk of immediate parliamentary elections. But the respite may prove short-lived. The immediate challenge is passing a budget by year’s end. With the far right and far left certain to reject whatever the new government proposes, the path to a solution remains narrow.
The immediate price of political survival appears steep. Macron’s flagship pension reform – raising the retirement age from 62 to 64 – may be scrapped, costing an additional €3 billion in 2027. Tax cuts may be reversed, further dismantling Macron’s legacy. Political instability has already pushed household savings to pandemic levels as confidence evaporates.
Meanwhile, one of Macron’s former prime ministers, Édouard Philippe, has called for him to resign, while another, Gabriel Attal, says he no longer understands what the president is doing. Given that polls point to another hung parliament, a presidential election may be the only way to clear the air. Macron insists he will see out his term, which does not end until mid-2027. But the longer the instability continues, the more he appears part of the problem rather than the solution.
For the moment, this remains a French political crisis rather than a European financial one. French borrowing costs jumped when Lecornu resigned and briefly overtook Italy’s for the first time. But the spread over German Bunds did not rise above 86 basis points – still below the 2012 peak and far below the 300-point spreads during the euro crisis. The likelihood of soaring to crisis-era levels is low because investors would be betting against the European Central Bank, which now has new crisis-fighting instruments.
Besides, France’s debt problems look manageable for now. Interest costs are still only 4 percent of government revenues, thanks to years of ultra-low interest rates, and with an average maturity of eight years, it will take time for today’s higher rates to feed through. In contrast, US interest costs are 13 percent of revenues. Moreover, unlike countries caught up in the 2010-2012 euro crisis, including Greece, France does not run large current account deficits, meaning it need not rely on foreign borrowing to fund itself.
Yet the trajectory is troubling. Goldman Sachs estimates France needs a 4-percentage-point GDP adjustment just to stabilize its debt. The previous prime minister, François Bayrou, planned 0.8 points of fiscal tightening, reducing the deficit to 4.6 percent next year. That now appears out of reach, with most observers expecting at best a reduction to 5 percent. The longer deficits persist, the harder eventual adjustment becomes.
The question Europe now faces is not just whether Macron survives, but what becomes of his vision for a more integrated European Union capable of exercising “strategic autonomy” in an emerging multipolar world.
The immediate risk to Europe is that a weak French economy becomes a further drag on growth already held back by a German economy on the brink of technical recession amid collapsing industrial output this year. German growth will pick up next year as massive infrastructure and defense spending boosts kick in. Nonetheless, it is striking that European growth is currently driven by former crisis countries such as Spain and Greece. That reflects deep structural reforms during the euro crisis years that France and Germany ducked.
The greater risk for Europe is that a weakened France becomes an obstacle to much-needed continental reform. Since emerging as a minister in François Hollande’s government a decade ago, Macron has been the most vocal proponent of deeper European integration. The EU already struggles to implement reforms recommended in the Draghi report – reducing red tape, deepening the single market in energy, defense, financial services, and telecoms. With France in political turmoil, progress on these projects may stall.
More fundamentally, new common borrowing for defense, clean energy, and scientific research, as advocated by Draghi, becomes nearly impossible while questions hang over the debt sustainability of the eurozone’s second-largest member, one flagrantly breaching fiscal rules. This would dash hopes of a greater global role for the euro or increased supply of safe assets essential to underpin a more dynamic European financial sector.
An even bleaker outlook confronts Europe should Macron’s term end – whether now or in 2027 – with Marine Le Pen’s National Rally taking power. That scenario looks increasingly plausible. National Rally polls at 33 percent, virtually guaranteeing that Le Pen, or her protégé Jordan Bardella, would reach the second round for a third time. Depending on her opponent, voters might finally take the risk. One consequence of Macron’s own political failure has been to weaken the center ground of French politics, leaving no obvious successor.
The far-right party has renounced Frexit, but its policies would put it on collision course with Brussels. It would undermine the Franco-German partnership that has driven EU integration for decades, throw into doubt EU support for Ukraine, stall single market integration and trade deals, and strengthen the right-wing populist bloc in the EU, soon likely reinforced by Andrej Babiš following his victory in last week’s Czech election.
The question Europe now faces is not just whether Macron survives, but what becomes of his vision for a more integrated European Union capable of exercising “strategic autonomy” in an emerging multipolar world. No obvious successor waits in the wings to claim his mantle of leadership. Germany remains consumed by internal debates. Italy’s Giorgia Meloni has proven pragmatic, but her commitment to integration remains tactical. The danger is that Macron’s diminished status will only hasten Europe’s fragmentation and geopolitical weakness.
Simon Nixon is an independent journalist and commentator on British, European and international political economy and geoeconomics.