Government's financial troubles stir apprehension among economists in France

In the heart of Europe, France is grappling with an economic crisis that threatens to topple its government. The country's sky-high levels of debt have put it on the brink of collapse, a situation that is causing concern not only domestically but also across the eurozone and beyond.

The French government's attempts to tackle its debt have been met with scepticism from some quarters. Jorg Kramer, Commerzbank's Chief Economist, has expressed doubts about France's ability to reduce its budget deficit from the current 5.8% to the targeted 4.6% of GDP next year, under a new prime minister.

France carries the largest debt burden in the eurozone, amounting to approximately 3.3 trillion euros ($3.9 trillion). This staggering figure has raised concerns, particularly among those closely watching the situation, such as European Central Bank (ECB) President Christine Lagarde.

Lagarde does not expect France to seek financial assistance from the International Monetary Fund (IMF) to stabilise its finances. However, she is closely monitoring events in France, aware of the potential implications for the eurozone should the crisis deepen.

The current French government, led by Prime Minister Francois Bayrou, has announced a vote of confidence in parliament, with the vote expected to take place on Monday afternoon. Bayrou had previously warned of a potential increase in borrowing costs if France failed to change its debt trajectory.

To address the crisis, the government has proposed an austerity budget that includes savings of 43.8 billion euros. However, Commerzbank's Jorg Kramer considers this unrealistic due to the lack of a parliamentary majority for reforms.

Should the government collapse, potential successors include Defense Minister Sébastien Lecornu, Gérald Darmanin, and Catherine Vautrin. In a significant political shift, a Prime Minister from Marine Le Pen's National Rally (RN) could also be appointed.

The political crisis in France, if not resolved, could raise concerns about France's economic stability and potentially lead to an increase in borrowing costs. Currently, interest rates for French government bonds are higher than for Greek bonds and almost as high as rates on Italian bonds, a clear indication of the market's unease.

Despite these challenges, Lagarde believes the French banking system is better positioned than during the last financial crisis. However, the future of France's economy remains uncertain, and the coming weeks will be crucial in determining the country's path forward.