As the market expected, after failing to break the deadlock over the 2025 budget proposal, the newly formed French government, just three months old, was indeed &#34;blocked&#34; by a coalition of the far-right and the far-left.According to CCTV reports, on Wednesday, December 4th, the French National Assembly voted to pass a motion of no confidence against the current government. The French government is facing another reshuffle.The results of the parliamentary vote showed that 331 votes supported the no-confidence motion, exceeding the 288 opposing votes. Therefore, the government led by Prime Minister Barnier did not &#34;survive&#34; the parliamentary no-confidence vote. This is the first time since 1962 that a French government has been overthrown due to a no-confidence vote in over 60 years. Barnier has only been Prime Minister for three months, making him the shortest-serving Prime Minister since the establishment of the Fifth Republic of France in 1958.This no-confidence vote is a consequence of Barnier's forceful passage of the budget bill. Due to the government's heavy debt, Barnier attempted to have the parliament approve a budget plan that included tax increases and spending cuts of 60 billion euros to control France's rising public deficit. According to this plan, the ratio of France's government borrowing to GDP in 2025 could drop to 5%, otherwise it could approach 7%, which would be more than double the EU's Stability and Growth Pact limit of 3%. However, the 2025 budget proposal has faced opposition in parliament, and the Barnier government refused to modify the proposal to meet the demands of opposition parties such as the far-right National Rally.On Monday, the 2nd of this month, Barnier stated that he would invoke Article 49.3 of the Constitution to bypass the National Assembly and force through a social security bill related to the 2025 budget, which triggered strong dissatisfaction from far-right and left-wing parties. Both the National Rally and the left-wing party alliance &#34;New People's Front&#34; submitted motions of no confidence against the Barnier government.The voting results on Wednesday mean that French President Macron will have to nominate a second Prime Minister after the summer elections. The French Constitution does not specify a deadline for the president to decide on a new Prime Minister, but it states that France cannot hold two parliamentary elections within a year. Therefore, in the most extreme case, the political deadlock in France may continue intermittently until July next year, when there may be an opportunity for Macron to dissolve the parliament again to break the deadlock.Marine Le Pen, the leader of the National Rally, stated after the vote on Wednesday that she is prepared to present a French budget draft that can be accepted by all parties and claimed that there was no demand for President Macron to resign.Wall Street Journal mentioned that even if the government is overthrown, the emergency law &#34;special law&#34; can ensure that the French government does not experience a &#34;shutdown&#34; like the U.S. federal government. However, under the special law, the government will be authorized to maintain only the minimum level of spending for basic public services and cannot exceed the spending level of the 2024 budget, which may lead to significant tightening of government spending.Moreover, since its introduction in 2001, the special law has never been truly utilized. It is difficult to predict how a government without a majority in parliament will implement these provisions and the subsequent impacts of such implementation.Carsten Nickel, Deputy Director of Research at Teneo, stated in a report on Tuesday that once Barnier resigns, Macron may ask him to continue leading the caretaker government. Given the apparent lack of a parliamentary majority from the outset, Macron seems unlikely to adopt the alternative of formally re-nominating Barnier as Prime MinisterDue to the new elections not being held until next year, this caretaker government status may last for several months. Another possibility is that Macron resigns, leading to a presidential election within 35 days.The report believes that the series of events mentioned above will result in the budget bill being unable to pass, and the likelihood of reaching a last-minute agreement seems very low. Therefore, the caretaker government may propose a special constitution that will &#34;effectively extend the accounts for 2024 without any previously envisioned spending cuts or tax increases, while granting the government the power to continue taxing.&#34;<h2>Economists Warn of High Economic Costs for France</h2>Economists warn that the political deadlock following the government's collapse will impose high economic costs on France. The lack of a new budget for 2025 will lead to an increase in France's deficit, stimulate a rise in bond yields, and hinder international investors.Javier Díaz-Giménez, an economics professor at IESE Business School in Spain, believes that the situation in France looks &#34;very bad&#34; for international investors. Without a budget, France would default, not because the government is unable to pay interest on its debt, but because without a budget, it will not pay interest.He pointed out that rating agencies have already issued warnings, with the premium on 10-year French bonds being higher than that of Greece, which is fundamentally crazy. It is worth noting that during the Eurozone debt crisis, when Greece defaulted on its sovereign debt, Greece briefly lost its investment-grade credit rating. International investors like pension funds only want guaranteed sources of income, so they will sell French bonds and turn to investments in other regions.Gilles Moëc, chief economist at AXA, noted in a report on Monday that France could rely on a large amount of domestic savings to replace international investors. Eurozone data helps decouple European and U.S. yields, but in the medium term, using too much domestic savings to fund the government may mean incurring high costs to drive growth momentum. Consumer confidence has already declined, and the savings rate may rise further, which will hinder the consumption rebound that the government relies on to support tax revenue in 2025.Díaz-Giménez stated that in addition to affecting economic growth and stability, the government's collapse would lead France's debt towards an unsustainable direction.In light of the French government's proposal for significant tax increases and cuts in public spending, economists have downgraded their forecasts for French economic growth following the announcement of the 2025 budget in October. Analysts at ING previously predicted that French economic growth would slow from 1.1% in 2024 to 0.6% in 2025.On Tuesday, these ING analysts stated that the collapse of the Barnier government is &#34;bad news for the French economy&#34; as public deficits will remain high, debt will continue to grow, and the next government will face a more daunting task in correcting public finance issues.These analysts predict that a temporary budget similar to the 2024 framework will be passed, which will not correct the trajectory of public spending and will abandon Barnier's goal of reducing the public deficit from 6% of GDP to 5% in 2025, meaning that France will not move towards compliance with the new EU fiscal rules

This is the first time since 1962 that the French government has been overthrown due to a vote of no confidence. Barnier has only been Prime Minister for three months, making him the shortest-serving Prime Minister since the establishment of the Fifth Republic of France in 1958. Economists warn that the political deadlock following the government's collapse will come at a high economic cost for France, with the lack of a new budget for 2025 leading to an increase in the French deficit, stimulating a rise in bond yields, and hindering international investors

- Following a failed attempt to pass the 2025 budget, the French government led by Prime Minister Barnier was ousted by a no-confidence vote in the National Assembly, marking the first such event since 1962.  
- The vote, which resulted in 331 in favor and 288 against, was a consequence of Barnier's controversial budget plan aimed at reducing public debt through tax increases and spending cuts.  
- Economists warn that the political deadlock following the government's collapse could lead to increased deficits and hinder international investment, with predictions of slowed economic growth for France.

For the first time in over 60 years! The French National Assembly passes a motion of no confidence, forcing the government to resign