France's Le Pen hands Bayrou a lifeline, but budget will test her patience

By Elizabeth Pineau and Michel Rose

PARIS (Reuters) -French far right leader Marine Le Pen may have decided to let Prime Minister Francois Bayrou survive this time round, but his days might be numbered.

Bayrou survived his eighth no-confidence motion on Tuesday, after a truce struck with the Socialists collapsed over his failure to soften France's pensions reform but Le Pen's far-right National Rally (RN) declined to join the mutiny.

Together, the RN and left-wing lawmakers have the numbers to topple the government. Although RN lawmakers, the biggest bloc in parliament, allowed Bayrou to fight another day, their benevolence is unlikely to last long.    Le Pen's troops have made it clear that budget talks this autumn will be crunch time for Bayrou, who is struggling to push 40 billion euros in savings through a divided parliament to lower the euro zone's largest deficit and appease increasingly alarmed investors and EU beancounters.

"Voting a motion of no-confidence would be a very bad signal to ratings agencies and the IMF. It would be extremely damaging for the country," former Prime Minister Elisabeth Borne, now the education minister in Bayrou's government, told Reuters.

Boosted by their newfound power over Bayrou's future, the RN is making ever stricter budgetary demands that are virtually impossible for him to meet. During last year's budget, Le Pen orchestrated the ouster of Bayrou's predecessor Michel Barnier after he refused to respect just one of her four budgetary red lines.Boris Vallaud, the lower house Socialists' leader, said Bayrou's chances of making it to year's end were "very small."

RN lawmaker Jean-Philippe Tanguy was less emphatic, saying: "It'll depend on the budget."    A June 30 Ifop poll showed Bayrou, never popular, now has an 80% disapproval rating, his worst yet. He will present an outline of his 2026 budget by mid-July, with the text unveiled in late-September.

A Bayrou aide said it was too soon to write him off: "I wouldn't underestimate Bayrou's ability to find compromises."

    CALCULATIONS

RN sources told Reuters Le Pen believes it will be less costly to topple Bayrou in the autumn than now, when the geopolitical situation is fraught.

The RN itself is also less unified than it was, after Le Pen was convicted of embezzlement in March, knocking her out of the 2027 presidential race. She aims to overturn her ban, but it has raised the profile of her No. 2, Jordan Bardella, the party president, who will run in 2027 if she cannot.

Bardella, who is increasingly showing signs of independence from Le Pen, is keen to push the party towards a more fiscally conservative position and shed some of Le Pen's more socially-minded cost-of-living measures, one RN source said.

The source said the RN's 2025 red lines will be maintained and even hardened, by refusing any tax rises in the 2026 budget. Previously it had tolerated tax increases for the wealthiest.    The party has also hardened its position on French energy policy, turning against renewables and making nuclear energy a symbol of French national pride that it wants to turn into a key plank of its industrial manifesto.

The RN could even file a no-confidence motion if Bayrou decides to bypass parliament to pass a multi-year energy plan by decree. "That would be a casus belli," the source said.

In private, Le Pen's lawmakers say they would cast a favourable eye on Defence Minister Sébastien Lecornu, who they see as closer to their line on law and order, as a possible successor to Bayrou.

From July 8, Macron can dissolve parliament again and call fresh legislative elections. But he may be wary of plunging France back into chaos at a time of multiple global conflicts and economic uncertainty stemming from U.S. President Donald Trump's trade wars.

Dissolving parliament would have the benefit of dislodging Le Pen from her parliamentary seat, but many Macron allies think a new election would be ill-advised, with opinion polls showing the RN and Bardella more popular than ever.    "The chances of getting a more governable Assembly than the current one are close to zero," Borne warned.

(Writing by Michel RoseEditing by Peter Graff)