France’s government is at risk of collapsing before the end of the week, with potentially painful economic and financial consequences, Bloomberg reports.

On Monday, Marine Le Pen’s far-right National Rally said it would back a proposal to topple the French government after Prime Minister Michel Barnier did not agree to all of its demands for next year’s budget.

How quickly could things evolve?

The French prime minister told the National Assembly on Monday that he will use a constitutional mechanism that allows the social security bill to be approved without a vote, a decision that opens the way for the opposition to table a motion of no confidence. Immediately after the announcement, the National Rally stated that it would support a motion of censure against the government.

Because Le Pen’s party is the largest in the lower house of parliament, her support will lead to the collapse of the Barnier government.

After the opposition tabled the no-confidence motion on Monday, 48 hours must pass before the debate in parliament begins. The vote will take place on Wednesday.

Constitutional scholars, politicians and economists disagree on exactly what will happen if the impeachment motion passes at this particular juncture near the end-of-year budget deadline.

Bills rejected after criticism in France are not technically dead, but a caretaker government has little legitimacy to push them through parliament or try to implement them through legislation.

Provisions are in place to avoid a complete shutdown on January 1, but how a weakened government will implement them – and the subsequent impact of using such maneuvers – is hard to predict.

“At the end of the day there is no instruction manual on what to do if a budget is not passed,” said Oddo BHF chief economist Bruno Cavalier. “We are testing the limits of a system in a country that was supposed to have the political stability of a democratic monarchy.”

Shutdown of the state as in the US

The risk of a shutdown of federal public services is almost nil thanks to the existence of an emergency law – known as the loi spéciale – which gives parliamentary permission to collect taxes in January. The “special law” would allow the government to carry over the previous year’s budget for a few months into the next year.

However, there are risks with the use of the temporary measure that are difficult to predict. The process entails approving only the minimum expenditure that the government considers vital to the continued delivery of public services, and no more than that voted in the 2024 budget. Depending on the interpretation, this could lead to severe cuts, particularly in areas such as defense where spending was to increase.

“The loi spéciale just allows the state to operate, it doesn’t allow the government to add to the budget,” said public law professor Anne-Charlene Bezzina. “This is real austerity, pure current spending.”

Adding to the already existing uncertainty, the loi spéciale in the form adopted in 2001 has never been used before. Similar measures were implemented in 1962 and 1979, but in very different circumstances — and not due to the collapse of a government during a budget vote.

“This crisis is multifaceted,” Bezzina said.

What does this mean for Macron?

If the censure motion is passed, Barnier’s government will now be caretaker until Macron appoints a new prime minister – or re-appoints Barnier – to try again to pass the budget. But there is no obvious candidate who could command a majority from the three opposing blocs in the National Assembly.

A second option would be to call new parliamentary elections to change the balance of power in parliament, but Macron cannot call new elections until the summer of 2025, a year after the last vote.

With no obvious way to restore political stability, opposition parties have called for his resignation, with Le Pen already citing that scenario as a third option.

“Our constitution is clear when there is a serious political crisis,” Le Pen said. “It is the president’s decision and his responsibility.”

But Macron cannot be forced out of office and the next presidential election, which Le Pen leads according to opinion polls, is set for 2027. After making efforts to clean up her party’s image since the days of Jeanne’s father -Marie Le Pen, the early presidential election could make it difficult for her to plan her campaign.

How markets respond

The dangerous political situation has prompted investors to sell bonds. It has driven the 10-year bond yield back to pre-euro crisis levels, signaling greater pressure on the market than when President Macron dissolved the National Assembly in June.

French bonds and stocks came under fresh selling pressure on Monday afternoon after Le Pen’s party said it would support the impeachment motion.

The spread between 10-year French and German bonds widened as much as eight basis points to 89 basis points today, nearing its highest level since 2012. The CAC 40 index traded 0.4 percent lower, while the euro fell more than 1 percent.