The French Snap Election and Why It Matters

Financial stability and social cohesion are on the ballot

French voters return to the polls this Sunday in the first of two rounds of voting in crucial legislative elections that matters for the country’s finances and social cohesion.

This comes after President Macron surprised the country earlier this month by announcing the dissolution of parliament and new elections, following his liberal political grouping's poor showing in the European elections. In those elections, Marine Le Pen’s far-right National Rally (Rassemblement National) came first, securing more than double the votes of Macron’s political grouping (Ensemble!), which had to settle for second place.

A Government With No Majority

Since his re-election in 2022, President Macron’s centrist political group within the National Assembly has not enjoyed an outright majority. It has on numerous occasions relied on Article 49.3 of the Constitution to pass legislation without a vote. As French national debt to GDP continues to climb and the electorate feels their economic and political concerns are not being addressed quickly enough, it has become uncertain whether the government, now led by Prime Minister Gabriel Attal, can continue to govern effectively until the next scheduled elections in 2027 without facing a significant political backlash.

France needs to take tough budgetary measures to improve its financial situation. Government debt today stands at more than 110% of GDP, which is the third highest in the euro area after Greece and Italy. Earlier this month, French government debt was downgraded by the S&P credit ratings agency, following a budget deficit of 5.5% in 2023. The deficit is forecasted to remain above 3% in 2027. In announcing the decision, the credit agency noted the strong opposition to some reform proposals that the government had faced without an absolute majority in parliament.

Lower-rated government debt is more expensive to service, as investors demand higher interest rates to compensate for the additional risk. This means the French taxpayer could face higher interest payments in the future, leaving less room to spend in other areas. The European Union has also expressed concern as France is among several EU countries that have exceeded agreed deficit levels. The European Commission plans to propose to open excessive deficit procedures in July. Thus, France needs to find a way to reduce its debt burden soon.

The next budget, due in the autumn, should ideally have been the moment to announce tightening measures.  However, with new elections now in play, it remains to be seen if fiscal prudence will be a key feature of the next government.

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