Macronomics is "in tune with what a modern European economy needs"—Le Pen is notby George Magnus / February 7, 2017 / Leave a comment
On Sunday, in front of a crowd of about 3,000 supporters in Lyon, Front National leader Marine Le Pen formally launched her “France First” presidential campaign. On the previous day in the same city, Emmanuelle Macron had held a rally in front of two-three times as many people. Formerly of the Socialist Party, Macron is now more closely identified with his own organisation En Marche!, having announced that he will run as an independent. These two look like the frontrunners in the French presidential race: in the run-off on 7th May, they will probably go head-to-head.
There is no question that this election will be as significant to France and to Europe as the EU referendum was to the UK and Europe, and the election of Donald Trump was to the United States and the world.
Interestingly, whoever wins looks set to have a major task building a parliamentary majority for whatever programme they want to pursue. The Front National currently has two members in the 577-seat National Assembly, subject to the next legislative elections in June, while Macron currently has no party, let alone any MPs.
Le Pen’s economic agenda is cut from the same populist cloth as that of the Brexit campaign and Trump. Beaten up by opinion polls and pundits’ expectations in the UK and US last year, many people think Le Pen is, therefore, the likely winner.
She is appealing to and stirring up voters’ angst around globalisation. In her campaign address, she spoke in favour of a major cut in immigration, a tax on foreign workers, and trade barriers. These things would, of course, only be possible if France severed ties with the EU. And so she also spoke in favour of a period of negotiations with the EU to change or end the Schengen arrangement and end the pre-eminence of EU law. At the end of this, if agreement proved elusive, she would hold a referendum on France’s membership of the EU. If it ever came to this, then France’s membership of the euro would almost certainly be called into question, not least because separately, Le Pen has called for the return of the French franc.
Macron has avoided being pinned down to detail, but offers France something completely different. He has the highest approval ratings of any candidate, straddles the left and right, and is disliked by the far wings of both sides of the political spectrum. In a strange way, though, he is France’s Trump, not because of his beliefs, but because he is an outsider without a political party, drawing large crowds on the political stump.
Remember that this 39-year-old ex-investment banker was also Economy Minister in Francois Hollande’s government, resigning last year. He was responsible, amongst other things, for the Growth, Economic Activity and Equal Economic Opportunity Act. This is otherwise known as the Macron law (loi Macron), widely applauded as a tool to promote competition in the French economy, including by opening up various regulated professions and extending the possibilities for Sunday and evening working hours. He has spoken out against France’s 35-hour week and wealth tax and in favour of tax breaks for enterprises, more labour market flexibility and deregulation in the pensions and education arenas.
He is unequivocally pro-EU and pro-free trade, though he believes that the EU has institutional and democratic flaws that need addressing. Much to the pleasure of France’s big neighbour across the Rhine, no doubt, he has spoken about the Franco-German relationship as being key to strengthening the EU, especially in the wake of Trump.
Which of these candidates would suit the French economy better?
France is now emerging from a three-year stagnation, the lowest such period since 1945. But since 2015, it has at least been expanding at a moderate 1-1.5 per cent per year. Yet “France” and “structural problems” are well-known for being two sides of the same coin. For many years, France has been saddled with relatively high unemployment; much lower employment rates than, say, the UK and Germany; and persistent public sector deficits, characterised by a 57 per cent share of public spending in GDP, and now a national debt to GDP ratio of almost 100 per cent.
While the unemployment rate has recently dipped below 10 per cent, the regional dispersion of unemployment rates in France is one of the highest in the EU, with the highest rates in the north-east and south and south-west of the country. Not surprisingly, these regions have also recorded the highest shares of votes for the Front National in recent elections.
To improve flexibility and employment conditions in France—and this is not to detract from positive changes that have occurred in recent years—there remains much to be done. At some point, a French government will have to reverse the trend towards rising public debt, and consider lowering the tax burden. This would mean, though, a root-and-branch overhaul of the scope and efficiency of public spending.
Labour market reforms are also important, hard as these have been in France. Again, though, at some point a French government has to try and align job creation with France’s growing labour force, with a particular focus on the young, relatively unskilled, and immigrants. For some time, people have argued for measures such as decentralised labour agreements, simpler hire and fire procedures, stronger work incentive programmes, and incentives to companies for investment and worker training and education. Some of these, among other issues, have been addressed by the El Khomri law, named after the Labour Minister Myriam El Khomri, enacted last year.
Set against this backdrop, there’s no question that Macron’s economic background and ideas are tailor-made for France. He’s been in government as Economy Minister, gained plaudits for his contribution, and is more in tune with what a modern, complex European economy needs.
Where Le Pen has the political edge, perhaps, is her appeal to voters who think that France’s problem is fundamentally about being joined at the hip to a more economically efficient and disciplined Germany in a monetary union. Break the link, the argument goes, and France will regain control over the trade and people moving across her borders, the Banque de France and the new (sharply devalued) French franc.
Put another way, the disintegration of the EU and the largest global shock since the Second World War. It is in the hands of the French electorate. Faites vos jeux.