ECB Chief Says French Government Collapse Threatens Economy

(MENAFN) European Central Bank (ECB) President Christine Lagarde issued a stark warning on Monday, cautioning that the looming collapse of the French government following next week's confidence vote could carry serious economic consequences.

“What I have observed over the past six years (in this position) is that political developments and the emergence of political risks have an obvious impact on the economy, on how financial markets assess country risk, and are therefore a matter of concern for us,” Lagarde told media, as reported by a news outlet.

Despite the escalating political uncertainty, Lagarde ruled out concerns that France might require intervention from the International Monetary Fund (IMF).


“Countries turn to the IMF when they face a severe current account deficit and are unable to meet their obligations. That is not the case for France today,” she said.

Prime Minister Francois Bayrou, who leads a fragile minority government, has called a confidence vote scheduled for September 8. The move comes amid mounting political opposition to his proposed austerity package aimed at cutting nearly €44 billion ($51 billion) from public spending in an attempt to rein in France’s soaring debt levels, which have reached 113% of GDP.

With a budget deficit currently at 5.8%, France remains one of the most indebted economies in the eurozone.

Warning lawmakers that the country is “on the brink of over-indebtedness,” Bayrou urged parliament to opt for “responsibility over chaos.”

Still, the vote faces stiff resistance. Political opponents from across the spectrum—including the far-left France Unbowed (LFI), the far-right National Rally (RN), and the Socialist Party—have pledged to oppose the government in the no-confidence motion.

Adding to the political crisis, major French labor unions have announced a nationwide strike planned for September 10, rallying under the slogan: “Let’s block everything.”

Tensions over fiscal policy have already proven politically fatal. Just nine months earlier, failure to agree on the 2025 budget led to the downfall of the Michel Barnier government, which collapsed in December after a bipartisan alliance of left-wing and far-right lawmakers backed a no-confidence vote.

MENAFN01092025000045017169ID1110001414