Political Turmoil in France: Electricity Tax Controversy Sparks Crisis

French Prime Minister Michel Barnier has abandoned his plan to raise electricity taxes as part of the 2025 budget due to pressure from far-right threats of a no-confidence vote. The budget, facing opposition from both ends of the political spectrum, risks political and financial instability in France.

French Prime Minister Michel Barnier on Thursday scrapped plans to increase electricity taxes in the 2025 budget, bowing to pressure from far-right threats of a no-confidence vote if he failed to ease the burden on working classes. The proposal aimed to generate 3 billion euros by reversing a tax cut made during the recent energy crisis, part of a wider strategy to address a 60 billion euro fiscal shortfall through a combination of tax hikes and spending cuts.

President Emmanuel Macron's government is now in a difficult position, facing opposition from both the left and right. This situation presents a major challenge: either compromise on the budget's financial goals and risk France's economic stability, or face a critical no-confidence vote. Investor confidence is already shaky, evident from the temporary spike in French government bonds' risk premiums.

The National Rally party celebrated the tax cancellation as a victory but insists more budgetary red lines must be respected, as evidenced by their continuous engagement with Marine Le Pen's fiscal principles. As pressure mounts, the government may resort to using constitutional Article 49.3 to bypass parliamentary approval of the social security budget, a move likely to trigger a no-confidence motion.

(With inputs from agencies.)