Will Macron's Overhaul of the French Economy Succeed?

French Election: Celebrations for Macron's victory at The Louvre. Flickr / Laurie Shaull

Macron has settled on an expedited process to implement his labor and tax reforms.

Macron has more than just the German example to propel him in that direction. French economic reform is essential, he knows, to get Berlin on board with his ambitious program for the Eurozone. The new French government wants to impose a consistent fiscal policy on the zone, one made through zone-wide policy and budgeting, approved by a Eurozone parliament and managed by a Eurozone finance minister. He also wants Berlin to reflate the German economy to provide export opportunities to France and other EU members. But German chancellor Angela Merkel and her government have made clear their opposition to any such moves until fundamental economic reforms in France and elsewhere relieve their concerns that such arrangements will burden Germany with a heavy weight of dependents.

Under pressure from his desire to move Berlin, his own underperforming economy, and the need for a new president of a new party to show progress, Macron has settled on an expedited process to implement his reforms. He has asked the National Assembly, where his party recently won a commanding majority, to grant him the power to alter labor regulations by decree. The reforms would then go into effect before any lengthy and probably divisive parliamentary debate could delay them. If he gets this power, which seems likely, the government will then negotiate the details of the decree with unions and employers groups over the summer and presumably put them into effect as early as September. The process is not quite as antidemocratic as it seems. Once in effect, the new rules would require legislation from the assembly.

Even with a pliable assembly and decree power, these reforms face a battle. France’s powerful unions are far from on board with them, and it was their months-long street protests that blocked reform under the last administration—or rather forced such a watering down that Macron resigned in protest. Already, Philippe Martinez, head of the second largest and more leftist union group, CGT, has called for a day of strikes and demonstrations on September 12, presumably just in time for the proposed decrees. He has expressed the union’s extreme opposition to any change that allows the negotiation of wages and work rules at the company level. On a more positive—or rather less negative note—Laurent Berger, head of the larger French Democratic Confederation of Labor (CFDT) union, has said that he will wait to appraise the results of coming negotiations and that for now “[t]here is no blind trust or widespread distrust.” Especially since the CFDT recently surpassed the CGT as the nation’s largest private-sector union, those contrasting attitudes would seem to augur well for reform, or at least better than how matters stood under the Socialists. Also on the positive side is the feeling expressed recently by government spokesman Christophe Castaner that the nation voted “to free up labor in the country.”

The stakes clearly are high. France’s economic prospects depend on reform. To no small extent, prospects for the Eurozone do as well, not the least because Brexit removes a strong economy from the equation, one that Germany otherwise could have counted on to bear some of the burden. Perhaps there is reason for optimism given that Macron’s election speaks to a welcome and more farsighted aspect to French politics than has prevailed to date—one that will not readily repudiate the ballot box in favor of street protests and that will allow the reforms needed to improve French economic and Eurozone prospects. The test will come in the fall. No doubt the French economy and the EU will survive if the reform effort fails, but their political-economic future will look a lot less promising.

Milton Ezrati is a contributing editor at the National Interest, an affiliate of the Center for the Study of Human Capital at the University at Buffalo (SUNY), and recently joined Vested as its chief economist. His latest book, Thirty Tomorrows, describing how the world can cope with the challenges of globalization and aging demographics, was recently released by Thomas Dunne Books of Saint Martin’s Press.

Image: French Election: Celebrations for Macron's victory at The Louvre. Flickr / Laurie Shaull