French Prime Minister Michel Barnier on Thursday dropped plans to raise electricity taxes in his 2025 budget, bowing to far-right threats to bring the government down unless he eased the burden on the working classes.
However, the far-right National Rally (RN) warned this concession was insufficient to avoid a no-confidence vote as early as next week.
Barnier's government had hoped to bring in some 3 billion euros ($3.17 billion) by raising a tax on electricity that had been cut to near zero during the energy crisis of the past two years -- part of a broader effort to plug a gaping hole the public finances with 60 billion euros worth of tax hikes and spending cuts.
However, widespread opposition to the budget plans on the left and far right have left President Emmanuel Macron's prime minister and government facing a lose-lose situation: moderate the budget's fiscal ambitions and threaten France's financial stability or face a perilous no-confidence vote.
Investors are already skittish. A sell-off drove French government bonds on Wednesday to their highest risk premium over German bonds since the euro zone's 2012 debt crisis, before they regained some poise on Thursday.
"The National Rally has just won a victory by obtaining from Michel Barnier the cancellation of the 3 billion euro tax on electricity," RN party President Jordan Bardella wrote on X. "But we cannot stop there. Other red lines remain."
The party has in recent days reiterated Marine Le Pen's budget "red lines", including over government plans to delay indexing pensions to inflation and the re-profiling of companies' social security contributions.
Earlier, Finance Minister Antoine Armand said the government was ready to make "measured concessions", warning that failure to pass the budget could lead to a storm in financial markets.
Barnier's minority government may not survive beyond next week, when it will likely be forced on Monday to use a special constitutional power -- known as article 49.3 -- to push the social security budget through without a parliamentary vote due to lack of support.
That would invariably trigger a no-confidence motion.
"It's Thursday today. (The prime minister) has until Monday," far-right chief Marine Le Pen told Le Monde.
Even if the government lives through next week, the same may happen when the deadline approaches for the broader budget in mid-December. The RN has repeatedly said the budget is not acceptable as it stands.
PUBLIC DIVIDED
Public opinion on Barnier's future is split.
Much remains in flux, with Barnier's team meeting with the RN, which props up his administration, and other parties for talks to avoid the second French major political crisis in six months.
Le Pen and the RN have defended their right to vote to bring down the government, while the leftist block has also signalled its plan to topple Barnier's administration.
In a radio interview on Thursday, former President Francois Hollande, now a lawmaker from the Socialist Party, said he would vote to topple the government if Barnier uses article 49.3.
($1 = 0.9475 euros)
