The French government collapsed on Wednesday following a successful no-confidence vote, throwing France, the eurozone’s second-largest economy, into political turmoil.
The Details: The motion passed with 331 votes, far exceeding the required 288, as lawmakers from both the leftist New Popular Front (NFP) alliance and the far-right National Rally (RN) united in opposition.
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The historic vote was triggered after Prime Minister Michel Barnier used special constitutional powers to force a social security budget bill through Parliament without a vote.
Barnier, who had been in office for just three months, will now have to resign, marking the shortest tenure for a prime minister in France’s Fifth Republic.
Why It Matters: The government’s fall complicates France’s efforts to address its budget deficit and implement planned spending cuts and tax increases.
French President Emmanuel Macron must face the challenge of appointing a new prime minister, with the political landscape remaining divided until the next possible legislative elections in summer 2025.
Barnier is expected to resign immediately and Macron is supposed to ask him to continue as a “caretaker” prime minister while looking for a replacement.
Investors can monitor the market's reaction to the political turmoil through the iShares MSCI France ETF (NYSE:EWQ) which provides targeted exposure to the French economy. The ETF's top holdings include LVMH Moet Hennessy Louis Vuitton (OTC:LVMHF) (OTC:LVMUY), TotalEnergies SE (NYSE:TTE) and Schneider Electric SE (OTC:SBGSY).
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