Europe’s two largest and most powerful economies are going through a challenging period. In our previous articles, we provided detailed insights into the political chaos in Germany. As of last night, France has joined Germany in this turmoil, with the government led by Prime Minister Michel Barnier being toppled following a no-confidence vote. It would be fair to say that the political chaos and instability in these two countries will affect all of Europe and put the continent in a difficult position in global relations.
Let’s first take a closer look at the situation in Germany again. Following Donald Trump’s election victory, the coalition of the SPD, Greens, and FDP collapsed after German Chancellor Olaf Scholz failed to reach an agreement with Finance Minister Christian Lindner in their discussions, leading Scholz to dismiss Lindner. All parties have agreed on early elections, scheduled for February 23, 2025. However, the final decision on this matter rests with German President Frank-Walter Steinmeier. According to Germany’s electoral system, if a chancellor fails to secure a vote of confidence, the parliament must be dissolved within 21 days, and elections must take place within 60 days. In the confidence vote scheduled for January 15, 2025, it seems impossible for Scholz to win approval.
In France, Michel Barnier managed to remain prime minister for only three months, making him the shortest-serving prime minister since the establishment of the Fifth Republic in 1958. Moreover, this event marked the first time since 1962 that the National Assembly has brought down a government, a moment now etched in history. Barnier is expected to submit his resignation on Thursday morning, and President Macron is anticipated to address the nation on Thursday evening to announce the new prime ministerial candidate. However, the new prime minister’s task will not be easy, as Macron lacks a majority in the National Assembly. Even if the new prime minister secures a vote of confidence, it will once again be a minority government, reducing the likelihood of long-term stability. In this regard, early elections also seem to be on the horizon for France.
Undoubtedly, the backdrop to all this political instability lies in the economic difficulties faced by Europe’s major economies and the public’s distrust of politicians amid these challenges. In recent years, growth rates have been extremely low, and in 2023, the Eurozone even slipped into a recession. When compared to the average growth rate of 5.1% between 2000 and 2009, the scale of the economic stagnation in recent years becomes even more apparent. Furthermore, the high inflation period following 2021 has caused significant shock and dissatisfaction among Europeans. Both Trump’s victory in the U.S. and the collapse of governments in Europe can be seen as largely driven by these economic hardships.
In France, the key factor that brought down the government was budget disputes. The Barnier government’s budget proposal included 60 billion euros in tax increases and various spending cuts aimed at reducing France’s budget deficit, which the opposition turned into a no-confidence vote under the pretext of protecting the interests of the public. Similarly, in Germany, the coalition’s collapse was triggered by differing stances among partners on budget and debt issues.
So, who stands to gain from this chaotic environment? According to public opinion polls, Germany’s far-right AfD and France’s Le Pen-led party appear to be the biggest beneficiaries of this situation. The success of Donald Trump in the U.S. and the rise of far-right and far-left parties in Europe can fundamentally be attributed to high inflation and weak economic growth. A study by the Kiel Institute for the World Economy (IFW) predicts that in Germany’s February elections, 2% of the votes for the far-right (AfD) and far-left (BSW) will stem from these economic problems. Europe’s economic troubles are fueling political crises, empowering extremist parties. This creates a self-reinforcing cycle: a weaker economy leads to more unstable politics. While the old continent has proven its resilience time and again, its ability to compete globally is now very different. In this competitive landscape, the possibility of Europe weakening further should not be underestimated.