• French lawmakers will hold a vote of no-confidence in the fragile minority government of Prime Minister Michel Barnier on Wednesday which is expected to pass.
• Economists warned that the lack of a fresh 2025 budget would set the country’s deficit higher, spur higher bond yields and deter international investors.
• The political turbulence comes as Germany heads for its own no-confidence vote, adding to headwinds for the euro.

French lawmakers will hold a no-confidence vote in the fragile minority government of Prime Minister Michel Barnier on Wednesday, as economists warn the political stalemate likely to ensue will come at a high economic cost.

Two so-called “motions of censure” filed by both the left-wing and far-right opposition parties will be debated and voted on from 4 p.m. local time. The administration is widely seen as likely to be ousted, just three months after it was formed. If the government collapses, Barnier — who failed to find compromise within the heavily-divided National Assembly to pass a 2025 budget bill aimed at reducing the hefty French deficit — will then be forced to tender his resignation to President Emmanuel Macron.

From there, uncertainty reigns. Macron will eventually need to name a new prime minister, after already struggling to make such an appointment in the wake of the snap summer election which delivered the most votes to the left-wing coalition, but did not give any party a majority. Long-time minister Barnier had been seen as a technocratic compromise.

“Once Barnier resigns, Macron will likely ask him to continue as a caretaker. The alternative option of formally renominating Barnier looks unlikely given the manifest lack of a majority,” Carsten Nickel, deputy director of research at Teneo, said in a Tuesday note.

This caretaker status could drag on for months, since fresh elections cannot be held until next year, while another possibility is Macron’s resignation triggering presidential elections within 35 days, Nickel said.