What France’s political gridlock might cost its economy

France is awaiting news from President Emmanuel Macron about who will become the country’s next prime minister. Last week, the French government collapsed when lawmakers from the political left and right joined together to pass the first successful vote of no confidence against a prime minister since the 1960s.

Whoever gets chosen to fill that void, they’ll be saddled with a dysfunctional French National Assembly. And, they’ll be up against a tight deadline to pass a new budget and keep the government functioning.

Sophie Pedder has been following this. She’s Paris bureau chief and France correspondent for The Economist. She spoke with “Marketplace Morning Report” host David Brancaccio; the following is an edited transcript of their conversation.

David Brancaccio: So, the French National Assembly in some ways is about as effective as the U.S. Congress — polarized and has trouble passing a budget. How do you run a country there if you can’t hammer out a budget?

Sophie Pedder: Well, it’s incredibly difficult. And, we have this National Assembly split into three blocks, each one of them is a minority. And they don’t talk to each other, they have great difficulty agreeing on anything. I mean, the one thing I would say about France is that there is a procedure to get a temporary budget through. Even without a formal parliamentary approval for a 2025 budget, we can still see France — this is likely to happen — in a position to continue without having a government shutdown. So that is one difference with the U.S.

Brancaccio: Now, the U.S. economy has been, by many measures, cruising along. But I would say not Europe’s: Stagnation in Germany, as we’ve reported on. France as well?

Pedder: Well, the French economy hasn’t gone into recession like Germany’s economy has. So in one sense, it’s doing considerably better. But it is not, by any measure, a sort of star performer in the European Union. It’s particularly been affected by Germany’s troubles economically. So France is not in a position of strength. That’s what makes the political crisis particularly difficult, because the two coming together at a time when France is also struggling with its public finances makes this a particularly difficult moment for the country.

Brancaccio: The macroeconomy, but how do people actually feel when you talk to them? Regular French families are probably not pressing for lower government borrowing and so forth. But what about economic insecurity there now?

Pedder: The big subject in France, as in the U.S., of course, has been inflation, and that is the thing that has really weighed on people’s minds. But France has brought down inflation. I mean, it has actually done a good job of getting it down, and that’s beginning to be felt. But it’s — there are always new worries, and the worries that are coming along now are the worries about people losing their jobs; factories, perhaps, closing; the general environment not being so supportive for France. So, if you were to visit Paris or to visit any of the big cities, you might be surprised. You’d see that people are sitting out there having their meals still and doing their shopping, and there isn’t a feeling of sort of crisis. But there is a squeeze on people’s pockets, and that’s what people still are feeling at the moment.

Brancaccio: I saw some, I would say, loose writing about fears France becomes Greece in 2010. That has to be overdone.

Pedder: Yes. You know, when you look at the market reaction, particularly in the sovereign bond market, of course there’s uncertainty about what’s happening in France, and that’s normal. It hasn’t been able to pass a budget, so that raises all sorts of concern. But there’s absolutely not a panic in the markets. We’d see that if there was.