Political Turmoil in France and Its Economic Impact

BRUSSELS (Reuters) – The economic impact of political turmoil in France on the rest of the European economy seems contained and rather limited, but the European Commission is monitoring it, a spokesman for the EU executive arm told a regular briefing on Thursday.

The risk premium investors demand to hold French debt rather than German Bunds dropped on Thursday after the widely expected collapse of the French government.

"We follow very closely what is going on in France," Commission spokesman Balazs Ujavri told the briefing. "What we see for now is that the economic effect is rather contained and limited. The macroeconomic situation in France remains stable."

Far-right and left-wing lawmakers joined forces early this week to back a no-confidence motion against Prime Minister Michel Barnier.

Analysts fear France would enter a slow-burning crisis that could lead to a deterioration of sovereign creditworthiness and less economic growth.

"We know that in the French constitution there are measures for scenarios in which we get to the end of the year and there is no budget," Ujvari said, referring to the roll-over of the 2024 tax and spending structure being rolled over to 2025.