Will the IMF Soon Be in Paris?

France is still without a government, which is unusual in the Fifth Republic. But major political decisions can still be taken: LFI will table a bill to repeal the pension reform, and the RN says it will vote for it, which will ensure that the bill has a majority to pass. (Le Figaro). This will not reassure international investors, and could have a cash impact on interest rates on French debt! Admittedly, this pension reform was superficial and parametric. Despite the massive protests it provoked, it did not resolve anything in depth. It would have been necessary to introduce capitalization, at least as an option. As a simple readjustment to an intrinsically flawed system (the repartition-based pension), its sole aim was to send a positive signal of rigor and the ability to reform internationally. This false benefit is about to vanish.

Still no government, but the economy continues to turn, and not very well: the number of business bankruptcies exceeds the peak reached after the 2008 subprime crisis. The Olympic Games are driving Parisians and tourists away from Paris; you'd have to be really stupid not to know how to take advantage of such an event! The installation of 44,000 fences and the return of the Pass make the center of the capital resemble a prison, and the image projected around the world is catastrophic. In a symbolic move that reflects Paris's declining attractiveness, Vivendi, one of the biggest names on the CAC 40, is to split up and list Canal+ in London and Havas in Amsterdam, with only publishing remaining in Paris. (La Tribune). This brings to light TotalEnergies' thoughts on a possible dual listing in Paris and New York. 

In short, France's image in the world is plummeting at a time when its budget deficit appears to be totally out of control, reaching the same level as at the time of the Covid crisis, when the economy was at a standstill and supported by the government! Let's not forget that half of the country's public debt is held by foreign investors (“non-residents” according to the terminology). Any marked defiance would result in a “Greek-style” crisis. Except that France weighs ten times as much in terms of GDP, so no aid plan could be put in place (who'd step up to the plate?). What would be needed is a drastic austerity plan. Hello, it's the IMF! Or, to be more precise, the “troika”, in reference to Greece (European Central Bank, European Commission, International Monetary Fund).

Emmanuel Macron declared on July 23 that he would not name a Prime Minister until after the Olympic Games, urging the political forces to negotiate and betting on “the broadest possible grouping to enable it to act and achieve stability”. An audacious gamble: the Nouveau Front Populaire, with the largest number of deputies even though it remained far from the majority, demanded Matignon and proposed a Prime Minister, Lucie Castets, but refused a broader coalition.

All this argumentation could suddenly vanish if the budget crisis were to erupt, if the markets were to blow the whistle on this game of liar's poker. In place of a Prime Minister, we'd have the Troika, and that's no laughing matter.