FED: Inter-Meeting FOMC Commentary Reflects Increasingly Patient Stance (2/3)

Prime Minister Sebastien Lecornu has confirmed that he intends to use Article 49.3 of the French Constitution to push through the state budget for 2026 without a parliamentary vote. This process will start tomorrow (Tuesday, 20 Jan), when he will advance the revenue side of the budget. Lecornu says he is using Art. 49.3 "with a certain degree of regret and a little bitterness". Speaking at the Elysee Palace, Lecornu restates his commitment to a 5% of GDP budget deficit, saying "The credibility of France's signature depends heavily on this commitment to 5%".

• The PM denounces "very clear attempts at sabotage by La France Insoumise [LFI] and the Rassemblement National [RN]". The far-left LFI has confirmed that it intends to move a censure motion against Lecornu. The far-right RN has not confirmed whether it will vote for the LFI motion or present its own. As noted earlier, the censure motions are unlikely to pass after the centre-left Socialist Party was given a series of sweeteners in the Budget at the end of last week (see FRANCE: Lecornu To Use Article 49.3 To Pass Budget).
• If the PS abstains on the confidence votes (potentially three for each of the times Art. 49.3 is invoked: one for the revenue section, one for expenditure, one for the final reading), then the censure motions are set to fail as the 289-vote majority threshold in the National Assembly will not be met. 

The EU's top diplomat, Kaja Kallas, said in a statement following a meeting with Danish and Greenlandic counterparts: “Arctic security is a shared transatlantic interest, and one we can discuss with our US allies. But tariff threats are not the way to go about this. Sovereignty is not for trade. We have no interest to pick a fight, but we will hold our ground. Europe has a slate of tools to protect its interests.”

• Kallas’ statement reflects a growing European consensus regarding President Trump’s tariff threat if a deal isn’t struck to authorise the sale of Greenland: To refrain from escalating with Washington, but reserve the use of retaliatory actions, including deployment of the EU’s Anti-Coercion Instrument.
• Danish Defence Minister Troels Lund Poulsen echoed the sentiment following a meeting with NATO SecGen Mark Rutte: “We wish to have a dialogue with the US… We have discussed a NATO mission in [Greenland/Arctic].”
• Bloomberg reported earlier that German Chancellor Friedrich Merz said he’s trying to persuade French President Emmanuel Macron to tone down his calls for the activation of the ACI.
• Meanwhile, Denmark appears to be bolstering its military presence in Greenland, likely in a bid to address one of Trump’s primary justifications for US sovereignty over the territory, complicate Trump’s efforts to annex the territory, and undermine Washington’s argument that Europe is leaving the island vulnerable to Russia/China.
• FT reports that the Danish defence forces said that a plane with a “substantial contribution” of soldiers and the head of the country’s army would land in Kangerlussuaq [Greenland]."

"*LITHUANIA, ESTONIA DROP OUT OF ECB VICE PRESIDENT RACE" Bloomberg
"*REHN, KAZAKS, VUJCIC, CENTENO REMAIN IN ECB VICE PRESIDENT RACE" Bloomberg

This sees the Baltic bloc coalesce around Latvian CB Governor Kazaks - who was one of the European Parliament's preferred candidates for the role.

The removal of Muller and Sadzius doesn't come as a surprise in this respect - politically it is easier for the group of countries to rally around one candidate.