New President, New Economy? France Hesitates as Macron Launches First Reforms

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Emmanuel Macron’s election to the presidency of the French Republic turned the French political sphere upside down. To distance himself from the previous presidency and its controversial legacy (even though he was Minister for Economic Affairs in 2014-16), the new president tried to impose a reformist and innovative style.

Macron was, at the beginning of the summer, in a very strong position and could very well impose its tempo: a massive political credit, a strong support of the newly-elected Assembly, an ingeniously-constituted government with well received nominations (especially Muriel Pénicaud for the very strategic Minister of Labour), and strong political plurality (from socialists to republicans).

The president’s first and foremost wish was to reform the overloaded and complicated “Labour Code.” This code gathers hundreds of articles that restrict all the aspect of the French social law and employee-employer relations. Its complexity and its archaism is one of the (many) explanations of the vast lack of competition France endured in the past 20 years. It is worth noting that, overall, the French labour law is extremely favorable to the employee. It is for instance extremely complicated and costly to fire an employee, in turn preventing many SMEs form hiring employees with permanent contract.

The main idea is to quash the Code in its present form and keep only the essential rules and principles, leaving the rest to be negotiated into the company to be then written into the collective bargaining. This decentralization would, according to the government, boost flexibility and instate social democracy by allowing negotiation at the company level or, at least, the professional branch. To some extent, this reform would bring France closer to the North American practices where collective bargaining is prominent.

The French are traditionally very reluctant for reforms especially when they deal with labour law. A proposal of a new type of employment contract (the C.P.E.) dedicated for the youth with a 2-year trial period led to massive unrest in the spring 2006. The proposal was shortly put on a shelf and wiped out then-PM Dominique de Villepin’s presidential ambitions. In 2016 the government led by the socialist Manuel Valls announced another vast reform intended to introduce more flexibility. This was met with strong opposition from both trade-unions and student-unions. Massive protest and strikes perturbed the country throughout May and June, even threatening the upcoming Euro 2016 soccer tournament that was to be hosted in July.

During the summer, the discontent progressively grew in the country against Macron and his government. This reform was just the tip of the iceberg and, after an idyllic honeymoon, many problems were fueling a widespread disappointment. The resignation of the Minister of Justice over suspicion of fictitious employment; very badly received budget cuts to the military and the following resignation of General Pierre de Villiers, the head of the French military forces, led to a massive loss of support for the president. Macron was, at the end of the summer, as unpopular as his predecessor at the same point in his term and much more than Sarkozy in 2007.

Macron fell at an astonishing pace in the opinion polls during the summer and continued (at a more moderate pace) during the autumn. He is already below 40 % of approval and is now less popular than his two predecessors at the same period of their respective mandate (and less popular than Justin Trudeau who’s been in office for almost 2 years).

To his credit, French public finances are not helping him. The outgoing government has been criticized for an erroneous 2017 budget based on overoptimistic macroeconomic forecast (a long-time flaw in French budgets). The Court of Audit even ruled that the budget was “insincere”, standing for voluntarily falsified in diplomatic language.

Given this situation, Macron was heading into some difficulties for his first autumn as president. Things turned out to go his way: the reform successfully passed the Parliament (under an accelerated process) and most of its dispositions are now applicable. One must agree that the government has showed coherence and efficiency throughout the whole process.

However, other external factors also explain Macron’s success. The most important being the huge division between the trade unions (CGT, FO…) and the rising far-left party La France Insoumise led by Jean-Luc Mélenchon that has undermined the opposition to the reform.

The progressive recovery of the French economy also greatly helps the government. After almost 5 years of chaotic growth and rising unemployment, the situation is improving at a fast pace and the economic outlook is the best since 2011.

Macron has emerged victorious of this political showdown and as the first president to accomplish a major reform since quite a long-time. Facing a demobilized opposition, a divided left and an inaudible right, Macron has been surfing on the country’s political re-composition with talent. Even Marine Le Pen, once considered as the strongest opposition figure in France under François Hollande’s presidency, remained in a deafening silence.

The president still faces many challenges. France is still in a great need of reforms, the geopolitical environment is still very unstable, terrorist threats are still a major concern for the French population, that list could go on forever… Donald Trump’s last move to impose a 20 % tax on foreign companies’ subsidiaries established in the US is a massive blow to the French-American relations. Many French companies have operations in the US and this protectionist move will impact them hugely, except if they have production facilities in the US and don’t import products from abroad. This declared war is one of the many dossiers on Macron’s desk.

By: Aymeric Molinier

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