French events scramble for energy amid warnings of financial disaster

French MPs have plunged into tense negotiations today after hotly contested elections left the government adrift with no party close to a majority and sparked fears over the future of the nation’s economy. 

Having emerged with a shock victory on Sunday, new MPs from the left-wing New Popular Front (NFP) alliance began visiting their new workplaces in parliament ahead of a first session on July 18.

But the coalition of Greens, Socialists, Communists and the hard-left France Unbowed (LFI) is still debating who to put forward as a potential prime minister. 

And their most prominent figurehead, LFI leader Jean-Luc Melenchon, has been dismissed as a potential candidate not only by Macron’s centrists but even by members of his own alliance. 

Meanwhile, France could face more economic turmoil if the NFP succeeds in implementing plans to roll back Macron’s widely loathed 2023 pension reform amid threats from credit raters.

The alliance plans a huge spending spree that would reduce the pension age from 64 to 60, boost public sector wages and freeze prices of essential goods, but Macron’s camp warned this could cost as much as €300 billion. 

France is already grappling with a budget deficit of 5.5% of GDP, and rater Moody’s warned it could downgrade its credit score for the nation’s more than €3 trillion pile of debt if the NFP follows through on reversing pension reform. 

Such a move from ‘stable’ to ‘negative’ could increase borrowing costs for France, dramatically reduce investor confidence and potentially strain public finances yet further.

The surprise victory of the NFP also set alarm bells ringing for the nation’s wealthy over plans to roll out an eye-watering 90% income tax on high earners.

Even before the election took place, financial advisers reported a huge influx of enquiries off the back of Emmanuel Macron’s decision to call a snap election, with well-off French citizens considering a move to more fiscally favourable territories such as Italy, the historic tax haven of Switzerland, and Spain. 

But the victory of the NFP over Macron’s centrists and the hard-right National Rally (RN) this Sunday has forced France’s elite to seriously consider how their fortunes would fare given the very real prospect of a dramatic tax-and-spend economic policy.

‘People are worried about a wealth tax, the end of the flat tax and potential higher taxation on salaries, as well as an overall atmosphere that is not pro-business,’ said Vincent Lazimi, a partner at law firm Jeantet in Paris, in comments leading up the the snap election.

Gregory Soudjoukdjian, a Parisian wealth adviser, told the FT following Macron’s election call: ‘I’m not sure I’ve had this many calls since the start of my career… our high-end clientele are asking themselves a lot of questions.

‘The question we get asked most frequently is if money is safe in France,’ he added.

The concerns of France’s wealthy were raised as the finance minister declared the nation is facing the prospect of an ‘immediate financial crisis’ after the government was left in deadlock following the narrow NFP victory.

Bruno Le Maire celebrated the loss of the hard-right RN, which Macron‘s centrists had feared could storm to a majority, but warned warring parties must come to an agreement and form a coalition in short order.

He also lambasted the economic policies set forth by the NFP, writing: ‘The most immediate risk is a financial crisis and France’s economic decline.

‘The application of the New Popular Front’s disruptive programme would destroy the results of the policies that we have pursued for seven years… 

‘This project is exorbitant, ineffective and dated. Its legitimacy is weak and circumstantial. It must not be applied,’ he concluded.

Defying the predictions of political experts, French polls and the world’s media, the NFP came from behind on Sunday to eke out a victory with more than 180 seats in France’s National Assembly.

That placed them just ahead of President Macron‘s centrist ‘Together’ coalition on more than 160, while the hard-right National Rally (RN) ended up in third place with just over 140 seats, despite having led the race convincingly after the first round of elections just one week ago. 

This means the overwhelming majority of seats are now split fairly evenly between three factions, all of which harbour very different ideas about the future of France with little interest in forming a coalition. 

Melenchon – a permanent fixture of the French left and a divisive firebrand dubbed the ‘French Jeremy Corbyn’ – has declared the NFP must be given the reigns so it can begin implementing its policies.

‘The president must invite the New Popular Front to govern,’ he said, characterising the election results as a damning indictment of Macron and his centrist party. 

But his hopes of personally dragging France sharply leftward appear dead in the water after members of Macron’s party ruled out forming a coalition with what they see as a tax-and-spend, pro-Gaza figure who many in France view as an antisemitic radical.

Former Prime Minister Edouard Philippe, who is seen as a possible Macron successor in 2027, said any potential coalition government ‘cannot be the work of a single man’ and dismissed any prospect of working with Melenchon’s hard-hard left LFI, or the hard-right RN.

‘The credibility of our country could be damaged by this and the centrist political forces must without compromise make an agreement to stabilise politics – but without France Unbowed and the RN,’ he said.

Even leading members of Melenchon’s own alliance have admitted they do not think he is the right man for the job. 

Socialist leader Olivier Faure claimed Melenchon ‘is the most divisive figure within the NFP,’ while one Greens party lawmaker speaking on condition of anonymity said bluntly: ‘Melenchon is a problem.’

In the French system, the president nominates the prime minister, who must be able to survive a confidence vote in parliament – a tricky proposition with three closely-balanced political forces in play.

Any left-leaning government would need ‘broader support in the National Assembly,’ influential Socialist MP Boris Vallaud acknowledged in an interview with broadcaster France Inter.

‘None of the three leading blocs can govern alone,’ Stephane Sejourne, head of Macron’s Renaissance party, wrote in French daily Le Monde today.

‘The centrist bloc is ready to talk to all the members of the republican spectrum,’ he added – while naming red lines including that coalition members must support the EU and Ukraine and maintain business-friendly policies.

These requirements, he warned, ‘necessarily exclude LFI’ and Melenchon.

While France’s political factions continue to squabble with no immediate prospect of a stable coalition, Macron is seeking to capitalise on the chaos.

Yesterday, the President refused the resignation of his protégé Prime Minister Gabriel Attal and instructed him to stay in place as the government sits in limbo to continue presiding over the day-to-day management of the country. 

Macron will be hoping that Attal remaining in his post will portray his centrist ‘Together’ alliance as a stabilising force, and that the Prime Minister will help to maintain some kind of political continuity as Paris gears up to host the Olympic Games at the end of the month. 

But the president has given no further indication as to what his next move may be.

In a sign of rising tensions between the left and the Élysée Palace, LFI president Manuel Bompard suggested that Macron was trying to defy the will of the people by maintaining Attal.

He urged Macron to ‘respect’ the election result, adding: ‘There is no question of Gabriel Attal’s contribution as Prime Minister, wiping out the vote of the French people.’

Macron’s supporters have a very different view of the election, which they said ended inconclusively.

Gerald Darmanin, Minister of the Interior of France, said ‘No one won’ and claimed that both the Rally and the NPF ‘had lost’.

Sylvain Maillard, an MP with Macron’s group, said the search for a new prime minister could take ‘several weeks’.

‘The French people have chosen a parliament with three blocks of roughly equal size,’ he said, adding that the centrist bloc would be open to forming a government with other MPs except those belonging to Marine Le Pen’s RN or Melenchon’s LFI.

Macron’s office has simply said the will ‘wait for the new National Assembly to organise itself’ before making decisions on a new government.

There is no firm timeline for when Macron must name a prime minister, and no firm rule that he has to pick someone from the largest party or bloc in parliament – but an ongoing political paralysis would spell disaster for the nation. 

Under France’s Constitution, he still holds power over foreign policy, European affairs and defence, and is in charge of negotiating and ratifying international treaties. 

The president is also the commander-in-chief of the country’s armed forces and holds the nuclear codes.