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Financial uncertainty under the Eiffel Tower! Central bank hopes politicians can come to an understanding by September

Parliamentary elections last Sunday plunged France into uncharted waters, with three different political blocs emerging and no clear path to forming a government

Jul 11, 2024 12:48 149

Financial uncertainty under the Eiffel Tower! Central bank hopes politicians can come to an understanding by September  - 1

Central Bank of France Governor Francois Villeroy de Gallo said on Thursday that he hoped the country's political impasse would be resolved by September, when the parliament of the eurozone's second-largest economy is due to vote on the country's budget.

Last Sunday's parliamentary elections threw France into uncharted waters, with three different political blocs emerging and no clear path to forming a government.

The New Popular Front (NFP), a hastily formed alliance of the hard-left party "Unconquered France" and the Socialist, Green and Communist Party, unexpectedly won the most seats in Sunday's vote, but not an outright majority.

"The budget must be adopted at the end of September. I hope that between then and now we can remove the element of uncertainty and that we will have more political clarity, but that is obviously not in my field,'' Villeroy told the France Info radio network.

Villeroy, who is also a member of the European Central Bank, added that it was vital for the French government to reduce the country's deficit.

The French government expects to reduce its public sector budget deficit from 5.1% of economic output in 2024 to 4.1% in 2025, with the aim of reducing the fiscal deficit to reach the European Union ceiling from 3% until 2027

On Wednesday, France's central bank said the economy should grow by 0.1% in the second quarter - at the upper end of the previously forecast range.

Villeroy said that while there are positive aspects to the overall economic situation, the outlook remains uncertain.

"I think if we have to summarize the overall picture of the French economy today, it is resisting well but remains fragile," he said.

French President Emmanuel Macron said on Wednesday that he would wait for the country's political parties to build a "republican" a majority in the National Assembly before it can decide on a new prime minister after no party won a majority in Sunday's legislative election.

Macron's comments came in a letter published by several French media outlets as political leaders of various parties tried to present themselves as the only solution to the ongoing political turmoil following the inconclusive results.

"No one has won," Macron says in the letter. "No political force has won a sufficient majority on its own, and any blocs or coalitions that emerge from these elections are in the minority," he said.