EURO ERM New Chapter with both France and Germany's budget deficits exceeding the limits set up for the EURO

 

The days of the Exchange Rate Mechanism come back to haunt both France and Germany whose budget deficits have gone beyond the limits set up for the EURO. 

We remember both John Major and Norman Lamont making desperate efforst and selling British gold reserves as it there was no tomorrow to try and keep the value of the Pound that was collapsing. 

Now, the French political crisis is also an economic crisis and the fact that from now on there might be no government or a government kept hostage by a fragmented French Assembly says a lot. 

Only in July 2025 could President Emmanuel Macron dissolve the French Assembly and call new Parliamentary Elections. Although on a speech made the day after the vote that defeated the government and marked the end of Michel Barnier as Prime Minister the President promised to stay for the whole duration of his mandate that ends in 2027, doubts remain about what will happen in France until 2027 in terms of real governance. The question is 'who will actually rule France?' The country should not until 2027 be run by decree because of the President's lack of support in the French Assembly. And what does this mean for the European Union?

In January 2025 there should be a vote in the German Parliament to decide the fate of Olaf Scholz, followed by a Federal Election in February 2025. Once again, what happens to German budgets? Rule by decree? Germany represents 24 per cent of the European Union economy.

Both Germany and France need stable governance and the EU itself will be in great difficulty when two major players face such uncertainty.

On January 20th 2024, new challenges to the European Union economy could rise. Who will then be the negotiators. The Axe Berlin/Paris is in trouble.