French Government Collapse Costs Economy Billions, New Minister Says

The recent collapse of the French government has dealt a significant blow to the nation’s economy, shaving off 0.3 percentage points of output and costing the state an estimated €6 billion ($6.2 billion) in lost tax revenue, according to Finance Minister Eric Lombar, Bloomberg reports.

“Uncertainty brings investment and hiring to a stop,” Lombard told BFM TV. “We have probably lost around 0.3 points of economic growth, so it’s very costly, and then €6 billion of lost revenues.”

The minister’s comments follow the new administration’s narrow escape from a no-confidence vote in the National Assembly on Thursday. The government, appointed in December, managed to survive the vote as both the far-right and most Socialists abstained. The political turmoil was triggered by the previous government led by Michel Barnier, which was ousted after attempting to implement a drastic reduction in the budget deficit from 6.1% to 5% of economic output.

The current Prime Minister, Francois Bayrou, who assumed office after Barnier’s ouster, has pledged a more moderate adjustment to 5.4%. He has also revised the 2025 economic growth forecast in the budget down to 0.9% from the previous estimate of 1.1%.

Lombard, who has played a crucial role in negotiating concessions with the Socialists, believes their abstention during the no-confidence vote indicates that the new fiscal plans have a better chance of being approved by parliament. He also expressed optimism that further interest-rate cuts by the European Central Bank will provide additional support to the struggling economy.