{"id":52203,"date":"2025-09-04T02:19:47","date_gmt":"2025-09-04T06:19:47","guid":{"rendered":"https:\/\/newssprinters.com\/index.php\/world\/how-does-it-impact-the-economy-and-investments\/04\/09\/2025\/"},"modified":"2025-09-04T02:19:47","modified_gmt":"2025-09-04T06:19:47","slug":"how-does-it-impact-the-economy-and-investments","status":"publish","type":"post","link":"https:\/\/newssprinters.com\/index.php\/world\/how-does-it-impact-the-economy-and-investments\/04\/09\/2025\/","title":{"rendered":"How does it impact the economy and investments?"},"content":{"rendered":"<p>\n<\/p>\n<div>\n<div class=\"atoms-wrapper\">\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Political instability is fuelling recession fears in Europe\u2019s second biggest economy, where fragile growth has recently shown surprising resilience despite trade tariffs biting.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->But while the economy shows promising signs, France is in urgent need of consolidating its finances, with its deficit amounting to 5.8% of GDP and debt amounting to 113% by the end of 2024.<!-- HTML_TAG_END --><\/p>\n<p> <iframe data-testid=\"offers-cds-iframe\" class=\"iframe yf-zhtypo\" src=\"https:\/\/templates.cds.yahoo.com\/remote\/widget?campaignId=89f4dc7d-6d6b-4709-a3f4-36e731817f00&amp;lineItemId=e5b29da5-00d9-4d3a-a3d2-d82b723c8871&amp;site=finance&amp;contentId=61fb5fdb-737c-371d-b445-282be78f8503&amp;spaceId=1183300100&amp;providerId=euronews_us_articles_576\" title=\"\" aria-hidden=\"true\" loading=\"lazy\"><\/iframe><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->The necessary belt-tightening is politically controversial, leading to the fall of the government led by Prime Minister Michel Barnier last year.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->On 8 September 2025, French Prime Minister Fran\u00e7ois Bayrou could risk a similar fate during a vote of confidence, which he called in an attempt to secure the National Assembly&#8217;s support for his \u20ac44 billion budget savings plan.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->The opposition, which constitutes the majority in the parliament, promised to most certainly vote him out, leaving the country to fall into political and economic uncertainty.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START --><b class=\"c-widget-related__title__text\">Related<\/b><!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Should there be no clear path ahead for households, businesses and investors, the nation&#8217;s timidly growing output could lose steam.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->France\u2019s economy has been struggling to gain momentum; its year-on-year GDP growth has remained below 1% since the fourth quarter of 2024.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->The quarterly expansion, however, grew by 0.3% in the second quarter compared to the first three months of the year. It follows a 0.1% quarter-on-quarter expansion between January and March, showing resilience in a period when the US President started placing tariffs on America&#8217;s trading partners.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Meanwhile, fresh manufacturing data shows that this sector in France started growing in August, for the first time after two and a half years.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Despite the French economy\u2019s weaknesses, analysts find it unlikely that it could be tipped into a recession due to the political turmoil.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->J\u00e9r\u00e9mie Peloso, chief European strategist at BCA Research, told Euronews Business that \u201cFrench institutions are strong&#8221;, meaning a potential political &#8220;transition would be smooth&#8221;.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->He added: &#8220;It would have a very limited impact on economic activity beyond political uncertainty and a hit to consumer and business confidence. But even there, I suspect the impact will be limited.\u201d<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->The largest French business federation, Medef, thinks differently.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Patrick Martin, the president of the organisation, warned that political uncertainty triggers immediate consequences, including \u201cfreezing of investments, loss of confidence, increased risk of bankruptcies, and job destruction\u201d.<!-- HTML_TAG_END --><\/p>\n<\/p><\/div>\n<p><button class=\"secondary-btn fin-size-large readmore-button  rounded   yf-3zn7qw\" data-ylk=\"elm:readmore;itc:1;sec:content-canvas;slk:Story%20Continues\" aria-label=\"Story Continues\" title=\"Story Continues\"> <span>Story Continues<\/span><\/button> <\/p>\n<div class=\"read-more-wrapper\" style=\"display: none\" data-testid=\"read-more\">\n<p class=\"yf-1090901\"><!-- HTML_TAG_START --><b class=\"c-widget-related__title__text\">Related<\/b><!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->He gave this warning at a business conference on the 28th August.\u00a0\u201cIf businesses cannot invest, growth and jobs collapse, and France risks entering a recession.\u201d<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Martin argued that certain sectors, including construction, chemicals, hotels and restaurants, are already in crisis. He also warned against further tax increases, which could limit business activity, the key to growth. And growth is necessary to work down the country\u2019s deficit and debt.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->The spending cuts and tax increases are necessary, according to the Prime Minister Francois Bayrou, to bring down the budget deficit to 4.6% of GDP from the expected 5.4% this year.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->In a French broadcast interview on Sunday evening, Bayrou called the current no-confidence vote crucial to the fate of the country.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->France is, indeed, in a tricky financial situation. According to the French statistics office (INSEE), the country\u2019s debt stood at \u20ac3.345 trillion at the end of the first quarter of 2025. While the debt was 60% of GDP at the beginning of the 2000s, it swelled to reach 116% this year.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->In an interview in June, Budget Minister Am\u00e9lie de Montchalin even argued that France risks its finances being placed under the supervision of the International Monetary Fund (IMF) or of European institutions. This happened to periphery countries, including Portugal and Greece, after the financial crisis in 2008.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->However, European Central Bank (ECB) President Christine Lagarde, who also led the IMF for years, dismissed this idea when talking to French Radio Classique on Monday.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->\u201cCountries turn to the IMF when they face a severe current account deficit and are unable to meet their obligations. That is not the case for France today,\u201d Lagarde explained.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->She added that she was concerned about the situation in France.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Peloso is also convinced that this would not happen. \u201cFrance will not go under the supervision of the IMF. France is not yet Argentina or Greece,\u201d he said.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START --><b class=\"c-widget-related__title__text\">Related<\/b><!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Even though the country\u2019s sovereign bond yields increased, signalling investors\u2019 concerns, \u201cFrance\u2019s ability to access capital is intact, and this is what matters most, ultimately,\u201d he said.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->France\u2019s borrowing costs currently indicate that its net general government interest payments are nearing 2% of GDP, the highest in a decade but still &#8220;somewhat contained&#8221;, said Peloso. However, according to the current trends, this may increase dramatically over the next few years.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Meanwhile, another implication of the political turmoil is that the risk of the French sovereign debt being downgraded has risen dramatically, driving up yields.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->\u201cFrance will very likely see its credit rating be downgraded and will be &#8216;kicked out&#8217; of the AA-club (the category of the highest rated bonds),\u201d Peloso said, forecasting some further rise in the bond yields if that happens.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Should the current government lose the vote on Monday, many believe that President Emmanuel Macron will appoint yet another prime minister. But the political paralysis stays, said Peloso.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->So far, it appears that no centrist government appointed by the president can avoid falling when it files a budget. And analysts expect no major change until 2027, when Macron&#8217;s mandate ends and the balance of forces is free to change on France\u2019s political playground.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Until then, however, the next government&#8217;s target will likely be much more modest, said Oxford Economics in a recent report. Given the fraught political environment, the new government\u2019s priority will be to pass a budget without being toppled. This reduces hopes of any significant fiscal consolidation before at least the presidential election of 2027, meaning France&#8217;s debt is likely to keep climbing.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1090901\"><!-- HTML_TAG_START -->Oxford Economics forecasts government debt exceeding the 120% of GDP threshold by the end of 2027.<!-- HTML_TAG_END --><\/p>\n<\/p><\/div>\n<\/p><\/div>\n<p><a href=\"https:\/\/finance.yahoo.com\/news\/political-instability-france-does-impact-053652120.html\" target=\"_blank\" rel=\"noopener nofollow\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Political instability is fuelling recession fears in Europe&rsquo;s second biggest economy, where fragile growth has recently shown surprising resilience despite trade tariffs<br \/><button class=\"read-more\"><a href=\"https:\/\/newssprinters.com\/index.php\/world\/how-does-it-impact-the-economy-and-investments\/04\/09\/2025\/\">Read More &rsaquo;<\/a><\/button><\/p>\n","protected":false},"author":1,"featured_media":52204,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[2],"tags":[],"fifu_image_url":"https:\/\/media.zenfs.com\/en\/euronews_us_articles_576\/0dee50ec100ba2a8535fc63ef9420275","_links":{"self":[{"href":"https:\/\/newssprinters.com\/index.php\/wp-json\/wp\/v2\/posts\/52203"}],"collection":[{"href":"https:\/\/newssprinters.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/newssprinters.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/newssprinters.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/newssprinters.com\/index.php\/wp-json\/wp\/v2\/comments?post=52203"}],"version-history":[{"count":0,"href":"https:\/\/newssprinters.com\/index.php\/wp-json\/wp\/v2\/posts\/52203\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/newssprinters.com\/index.php\/wp-json\/wp\/v2\/media\/52204"}],"wp:attachment":[{"href":"https:\/\/newssprinters.com\/index.php\/wp-json\/wp\/v2\/media?parent=52203"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/newssprinters.com\/index.php\/wp-json\/wp\/v2\/categories?post=52203"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/newssprinters.com\/index.php\/wp-json\/wp\/v2\/tags?post=52203"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}