“Our Europe is mortal, it can die,” warned Emmanuel Macron at the end of April. Who knew that just weeks later the president of France would begin to prove his point, calling an early election that threatens to plunge the entire EU into a potentially deadly crisis?
Currently, global attention is focused on the immediate political dramas in France. The first round of voting will take place on June 30. The far-right Rassemblement National currently leads the polls, with the New Popular Front, a far-left-dominated coalition, in second place.
At best, a parliament dominated by political extremes would plunge France into a period of prolonged instability. At worst, this would lead to the adoption of spendthrift and nationalist policies that would quickly provoke an economic and social crisis in France.
A French meltdown would quickly become the EU’s problem. There would be two main transmission mechanisms. The first is fiscal. The second is diplomatic.
France is in a financial mess. Public debt is 110 percent of GDP and the current government ran a budget deficit of 5.5 percent last year. Both the extreme right and the extreme left are committed to huge spending increases and tax cuts that would inflate the debt and deficit, in breach of EU rules.
Bruno Le Maire, France’s finance minister, has warned that victory for either extreme could lead to a debt crisis in France and oversight of the country’s finances by the IMF or the European Commission. Le Maire has pointed to the reaction to the Truss government’s “mini” budget in Britain to highlight how quickly markets can turn against a fiscally reckless government.
In reality, a French fiscal crisis could be worse than Britain’s attempt at Liz Truss. In the UK, there was a mechanism to dismiss Truss quickly and restore rational government. This task would be much more difficult in France, where the extreme right and extreme left have well-defined leadership and do not have more careful and reality-based politicians on the sidelines.
The second major complication is that France is one of 20 countries that use the single European currency.
What would happen if the risk premium on French bonds rose? The EU now has mechanisms to step in and intervene with bond purchases. But would Brussels or Berlin be willing to agree to such an action if the crisis had been provoked by unfunded French spending promises? The German government is currently trying to find billions of dollars in savings in its national budget. Why would he accept a bailout for a spendthrift France?
The French far right and far left are also deeply Eurosceptic – and are already defying dictates from Brussels and expressing hostility towards Germany. The RN’s electoral platform speaks of a “deep and irreconcilable divergence” between the world views of France and Germany. Jordan Bardella, who is likely to be the RN’s candidate for prime minister, recently threatened to cut France’s contribution to the EU budget by €2-3 billion a year.
During the Greek debt crisis, which lasted for the better part of a decade, the EU’s challenge from Athens was ultimately outweighed by the threat to expel Greece from the euro – a move that would have destroyed the value of Greek savings. But expelling France from the euro – or the EU itself – is inconceivable. The entire European project has been built around the Franco-German couple since the 1950s.
It is much more likely that France will stay in the EU and the single currency, but act as a spoiler. This would destroy European cohesion and stability, at a time when the EU is trying to unite in the face of the threat from Russia.
Unless Macron resigns (which seems unlikely), he will continue to represent France at international summits and EU meetings. But barring a last-minute swing in the polls, the French president is likely to emerge from this election a seriously diminished figure. Some of Macron’s European colleagues may be quietly enjoying the spectacle of “Jupiter” by bowing. But the overall impact on Europe of a diminished and angry France would be bleak.
The RN’s initial instincts would be to confront Brussels on behalf of French sovereignty. But far-right leaders have shown some awareness in recent years that hard-line Euroscepticism can scare and alienate voters and markets. After losing the 2017 presidential election, the RN quietly dropped talk of leaving the euro.
An economic crisis – combined with a confrontation with Brussels and Berlin – could cause the RN to revert to its nationalist and confrontational instincts. Otherwise, the realities of governance may force it into accommodation with the EU.
Those with long memories can point to the economic crisis in France in the early 1980s, when a socialist government tried to implement a radical, left-wing agenda. That crisis eventually led to the rise of Jacques Delors, first as French finance minister and then as president of the European Commission. In Brussels, Delors pushed forward dramatic advances in European integration and the launch of the single currency.
History is unlikely to repeat itself in the same way. But decades of experience suggest it is a mistake to bet against the EU’s ability to overcome seemingly mortal threats.
gideon.rachman@ft.com