Marine Le Pen might be about to wreck the eurozone

PARIS — Marine Le Pen could be about to trigger a Greece-style eurozone crisis as she decides whether to bring down France’s fledging government.

As the European Union faces up to political and economic turmoil — with the bloc’s most recent national election giving a hard-right Russia fan the highest vote share; Germany battered by a string of massive job losses; and leaders flailing over how to deal with another Donald Trump presidency — the French firebrand might be about to set the whole thing alight.      

The far-right politician and her National Rally party are weighing whether to vote against Prime Minister Michel Barnier’s budget, which would not only pull the plug on his fragile coalition government that has been in place less than three months, but also terrify financial markets and send shockwaves around Europe.

“If the budget remains as it is, we’ll vote for no confidence,” Le Pen said after meeting Barnier for over an hour Monday morning. “If the government collapses, the president of the Republic will have to choose a new prime minister.”

Barnier’s centrist-conservative minority government, formed after President Emmanuel Macron unexpectedly called an election in June that fractured parliament into three left-wing, centrist and far-right blocs, has prioritized sorting out the country’s disastrous public finances. Years of lavish spending has brought France’s deficit — the difference between how much it spends and how much it receives in taxes — to more than 6 percent of the entire economy, twice as much as permitted by EU rules.

So far, Le Pen has resisted torpedoing the coalition. But she has always said she would vote down the budget if she didn’t like it.

And she hates it. So does her rival left-wing group.

With debates about it in parliament coming to an end, together they have enough troops to collapse Barnier’s government and plunge the country into a new phase of political chaos.

“Marine Le Pen’s position is irresponsible,” said former Prime Minister Gabriel Attal, a Macron ally. “You can’t play heads or tails with the country’s future.”

Feeling the heat

But we’re not just talking about France.

“If tomorrow the government collapses over the budget, there will immediately be a financial crisis,”  Interior Minister Bruno Retailleau warned. “Don’t think that France is shielded.”

A decade ago, huge public debt in Greece almost toppled the single-currency eurozone. It exposed how crises couldn’t be contained in a single country, and it didn’t take much for the economies and banking systems of Portugal, Ireland and Spain to start teetering. Even big nations like France and Italy, so important to the health of the bloc, felt the heat.

But back then, Germany was strong under its chancellor, Angela Merkel. It could afford to bail out struggling allies and had the political capital to steady the ship. That’s now no longer the case, with the German economy in disarray and its government beleaguered. 

Volkswagen, Europe’s largest carmaker, has announced the first plant closures in its history, which could result in 30,000 jobs lost after a 42 percent drop in quarterly profits. Steelmaker ThyssenKrupp also announced on Monday it could shed up to 11,000 jobs by 2030. Thousands more are set to go at Bosch and Ford.

The European Central Bank warned last week that the bloc could be on the brink of a new eurozone debt crisis because of low growth and policy uncertainty. 

Embezzlement trial

Le Pen, who is preparing to run for French president in 2027, has criticized Barnier’s budget, which is aimed at saving €60 billion, for its planned higher taxes on electricity, and its proposed delay to the inflation adjustment for pensions. She has also railed against its failure to cut spending on bureaucracy and medical aid for migrants.

The budget showdown comes as the nationalist leader awaits a court decision on the embezzlement charges she faces. Le Pen, along with her party — the National Rally — and 26 other individuals are on trial for having allegedly embezzled funds from the European Parliament to pay party employees. All those accused have denied the charges.

Le Pen’s decision on the budget will be watched closely by financial markets, which can often dictate the course of action that governments take. The markets have calmed since a bout of worry after Macron initially called the election, but investors remain tense with France now deemed a worse credit risk than Portugal or Spain.

The moment of truth will come right before Christmas, when Barnier will have to use a constitutional trick to pass his budget. The gambit will allow him to pass a text without a parliamentary vote, but will also expose him to a no-confidence vote that could cost him his job.

And that’s when Marine Le Pen might strike.

‘Everything can explode’

Barnier already warned that the eurozone’s economic stability is at stake in France’s budget talks.

“We have to respect eurozone rules because, otherwise when one of the countries doesn’t respect it —  we saw what happened with Greece —  everything can explode,” he said on Friday at an event organized by French business lobby Medef in Paris. 

In a note last week, rating agency Moody’s expressed “doubt about the ability of [French] institutions to deliver policy outcomes”  and “expect [Paris’] debt burden to continue increasing.”

“The arrival of Barnier and the budget he proposed re-assured markets to a certain extent,” said Andreas Eisl, an economist at the Jacques Delors Institute, adding that “markets will react strongly if a different government will propose a strong departure from Barnier’s course.”

The European Commission on Tuesday is expected to approve the multi-year spending plan submitted by Barnier’s government and to outline a list of reforms. If France follows the Commission’s reform recommendations, it will be granted an extension from four to seven years to bring down its deficit.

Whether Le Pen has something to gain by killing Barnier’s government is still an open question.

While Le Pen is facing increasing pressure from her voters to take action, making the government collapse would be a political risk. However, an increasing number of French people, especially Le Pen voters, are changing their minds and want Barnier’s government to collapse, according to a recent poll by Elabe.

Public opinion at large is divided about whether Barnier should go, according to the survey.

Even Barnier is cautious.

Asked whether he will still be prime minister for Christmas, he said “it is a bit early“ to say.