Political crises in France and Germany, the two most influential countries in the European Union, are exacerbating the continent’s already struggling economy, Euronews writes.
The French Parliament recently voted to dismiss Prime Minister Michel Barnier, making him the shortest-serving leader in the history of the Fifth Republic. President Emmanuel Macron now faces intense pressure to appoint a new prime minister and even contending calls for his resignation.
The political rift that led to Barnier’s ouster was centered around the 2025 annual budget, making it more difficult for France to tackle its economic challenges. The country currently has the highest budget deficit in the eurozone at 6.2% of GDP.
Barnier had proposed measures to address the deficit within the maximum seven-year period permitted by the EU’s new fiscal rules. However, with no clear majority in France’s National Assembly and no elections until mid-2025, passing new tax and spending legislation will be a major hurdle. The left has pushed to reverse pension reforms central to Macron’s liberal agenda, while right-wing leader Marine Le Pen has advocated for indexing pensions to inflation, adding pressure to the fiscal situation.
Germany, the EU’s largest economy, is facing its own difficulties. The European Commission forecasts that Germany will be the bloc’s weakest performer in 2025, with growth predicted at just 0.7% after a contraction in 2024. Adding to the uncertainty, the ruling coalition in Berlin disintegrated in November due to disputes over fiscal policy between socialist Chancellor Olaf Scholz and liberal Finance Minister Christian Lindner.
Scholz has called for early elections in February, leaving the government in disarray and unable to present a concrete plan for addressing its deficit. This is particularly significant as Germany had been a proponent of strict EU fiscal rules.
The combination of political upheaval in Paris and Berlin makes it unlikely that Europe’s economic outlook will improve in the near future.
