The special law serves as a critical stopgap measure to maintain government operations and public services amidst a political crisis in France.
The inability to pass a budget highlights the challenges facing President Emmanuel Macron in forming a new government and gaining support from various political factions, particularly the Socialist Party.
The law's provisions reflect a cautious approach to fiscal policy, as it does not allow for changes to tax rates or the introduction of new tax measures, which could have significant implications for households.
If the special law is successfully enacted, it will provide temporary financial stability for the French government, but the lack of a new budget could lead to longer-term fiscal challenges.
The ongoing political negotiations may result in a new prime minister who can navigate the complexities of forming a coalition government, potentially impacting future budget proposals.
The political landscape in France may shift as parties reassess their strategies in light of the government's current challenges, possibly leading to new alliances or conflicts.
On December 11, 2024, the French government convened a Council of Ministers to discuss a "special law" aimed at ensuring the continuity of public services and state functions in the absence of an approved budget for 2025. This emergency legislation follows a motion of censure that led to the resignation of Prime Minister Michel Barnier and his government, making it impossible to finalize the budget before the year's end.
The special law, which has not been seen since 1979, is designed to prevent administrative paralysis by allowing the government to continue collecting existing taxes and enabling borrowing for both the state and social security. The law consists of three articles: the first authorizes the collection of taxes, the second permits the Minister of Finance to manage state debt, and the third allows social security organizations to borrow to meet cash flow needs.
Despite the urgency, the special law cannot be amended by parliamentarians, which has raised concerns among some lawmakers about its implications for tax policies. The law is expected to be examined by the National Assembly on December 16 and by the Senate on December 18, with the aim of being enacted before January 1, 2025.
