I understand that most people are not interested in the dynamics of financial markets and government finances. They are more concerned about the cost of living, the deterioration of public services and the effect of taxation on their quality of life.

France is going through a phase where politicians and economic analysts argue that, like the rest of Europe, the country is becoming more ungovernable.

French ruling politicians manoeuvre to retain their power while their adversaries in opposition plan the next move to bring down the government. So, does it really matter whether France is going through a crisis?

French governments, like in Italy, are used to living beyond their means. France’s current fiscal problems did not come out of the blue. The deficit has been below the three per cent of GDP in only three of the last 22 years, as successive governments have put off structural reforms. So the outgoing prime minister’s attempt to take relatively drastic action to reverse the growing fiscal deficits and debt trend was always unlikely to succeed.

This is one reason why so many EU member states languish in low growth, high unemployment or underemployment, high inflation, and growing electoral discontent with traditional political parties. When economic structural reforms are postponed for too long, it becomes almost impossible to put things right, even when it becomes evident that a country has its back against the wall.

France, like Germany and Italy, are also too big to fail. Unlike Greece and Portugal in the last financial crisis of 2008, France is not running a current account deficit – importing more than exporting. According to French Budget Minister Laurent Saint-Martin, it is running what many analysts consider an unsustainable fiscal deficit that may reach seven per cent in 2025.

The EU is very good at making tight regulations. However, it often fails to apply them when they affect the larger member states like France. So, do not expect the European Commission or the ECB to come down on France like the proverbial ton of bricks.

In a recent press conference, ECB president Christine Lagarde was asked whether she was worried about the French crisis. She quickly responded: “I will not talk about individual countries.” To her credit, Lagarde has improved her communication skills since one of her last gaffes in 2020 when she said that it was not the ECB’s role to “close the spread” in sovereign debt markets – referring to the gap between Italian and German bond yields that is a key risk indicator for Italy.

When economic structural reforms are postponed for too long, it becomes almost impossible to put things right, even when it becomes evident that a country has its back against the wall

So we should not expect any sanctions from the European Commission or the ECB if the French crisis continues too long. As the former commission president Jean-Claude Juncker once argued, France can flout existing deficit rules and avoid sanctions “parce que c’est la France” – because it is France.

Still, financial markets often react to worsening political and economic events with some delay. So far, there have been no market movements and no signs of panic because there was no element of surprise. At the time of writing, the CAC 40 actually rose following the vote of no confidence in the French parliament. Despite the massive and growing French deficit, France’s financial basics are in good shape. However, things can change suddenly.

Ken Wattret, the S&P Global Market Intelligence vice president, warns that the crisis will continue for quite some time. So far, the financial markets’ response to it has been relatively benign, but the reaction could worsen the longer it continues.

In the short term, the failure of the French parliament to approve the 2025 budget will not have an immediate impact on the government’s finances or ordinary people’s lives. There is no real risk of a US-style government shutdown. The new French prime minister can adopt a special law allowing the state to effectively carry over the previous year’s budget until a new one is adopted.

For most French people, the complexities of the EU fiscal rules have no impact on their behaviour. They will continue to get on with the business of making ends meet.

The longer EU member states delay the necessary economic and political reforms, the more difficult it will be for the Union to deliver on its promises for stronger economic growth, investment in new technologies and upgrading its defence framework.

Sadly, the economic and political challenges that France and Germany face threaten the EU’s cohesion at a time when the need for governance reforms is most urgent.