En Marché! France’s economy stands at a crossroads and for Macron, failure is not an option

France has long been considered the weakest of Europe’s big three economies, Europe’s black sheep. Yet, under the leadership of President Emmanuel Macron, it appears at long last to be moving in the right direction.

France has long been considered the weakest of Europe’s big three economies, Europe’s black sheep. Particularly when compared to the neighbouring economic powerhouse which is Germany, France’s economy has suffered years of anaemic growth, budget deficits, high unemployment, and income inequality. Many doubted that France could ever truly recover from the 2007-2008 financial crisis. France’s economy has for years been so mismanaged and over-regulated that it has been widely seen as near impossible to accomplish anything within its industry.

Yet, in the past year, it appears that France is at long last moving in the right direction.

In just one year, the French economy has seen a remarkable recovery. The unemployment rate, which peaked in 2015 at 10.5% is now down to 8.9%, with the European Union (EU) average index standing at 7.3%. These recent developments have largely been attributed to one man and his economic policies. French President Emmanuel Macron appears to have put France back on the right path.

In the past year, President Macron has taken the world by storm. Even German Chancellor Angela Merkel seems to be smitten by him and his politics. And by the looks of his most recent visit to America, US President Donald Trump appears to have a new best friend.

But just how successful is this political prodigy, and what has been accomplished?

Reforming France is certainly not easy, yet the French President appears to have both the charisma and luck needed to influence and instill courage in French businesses and households alike.

Macron certainly has his work cut out for him, and failure is not an option.

Key to his success, Macron has instituted three policies in particular that are arguably entirely “un-French” in their nature, but are apparently working.

First, despite fierce protests from unions and French socialist groups, Macron lowered corporate taxes by 3-5%, depending on corporate structure. This alone made Macron’s administration near unique to the modern day French political spectrum, as the first in over thirty years to not just talk about lowering corporate taxes, but do so. Macron also reduced, nearly abolishing, the infamous French wealth tax by 70%. All to make France more “business friendly.”

Second, Macron went after one of the holiest cows in socialist France, labour laws. To further make it easier for companies to hire and fire, he removed a series of legal restrictions to both. For instance, the reforms have nearly destroyed the need to have union mediations before firing a single employee, or the law that forced companies to fire the most recent hire rather than an older one.

For example, Macron directly challenged the status quo at the state-owned French Société nationale des chemins de fer français (SNCF, “National society of French railways” or “French National Railway Corporation”). The SNCF has long had a special agreement with its employees which guarantees lifetime employment, generous insurance, early retirement and unusually generous bonuses. This, along with the SNCF’s near monopolistic status in the French railroad industry has ensured that it is near impossible for competitors to enter the French market. Macron has publicly stated that he will not only change all that, but will push to open up the market for private operators completely.

Third, Macron has actively attempted to court companies that are now fleeing the UK due to the ongoing Brexit problem. Indeed, as the old Dutch proverb goes, De een z’n dood is de ander z’n brood (lit. “One man’s death is another man’s bread”, i.e. “One person’s loss is another person’s gain”).

Many tried to dismiss Emmanuel Macron as nothing but a Tony Blair, an empty shirt and a crowd pleaser that accomplishes little. Instead, it appears that Macron has been sincere in his reformist agenda, delivering on his promises. That is no easy task in a country that almost positively thrives on being politically and industrially stagnate.

However, much remains to be seen. The World Bank’s “Ease of Doing Business Index” shows that as France holds its very credible spot at 31st place, it remains difficult to deal with the French bureaucracy for numerous business matters, like registering a new company or changing existing company structures. Registering property was especially tricky, according to the World Bank. The challenges are therefore substantial, and despite the reforms, France has a long road ahead of it to be reasonably competitive.

[Check out the World Bank’s “Doing Business 2018” profile for France]

Emmanuel Macron refers to the reforms as “En Marché!” (forward, or on the move), and the French public seems to be onboard with it. However, in the short term, France will no doubt continue to see public strikes, and the public’s perception of the changes might come to change once it truly hits their daily lives.

This will no doubt begin to happen in the coming months, as Macron starts to go after the state-owned railway monopoly in earnest. If he fails to keep French citizens engaged and positive throughout these frustrations, France will no doubt reverse. If he manages to keep his constituents focused on the coming advantages, there are high hopes of further reforms.

No matter how France’s economic future twists and turns, it remains a nation with immense potential. Such potential can only be realized when its citizens are freed from a yoke of union straitjackets, staggering bureaucracy and political micromanagement, the kind that forces businesses to remain closed on Sundays.

Macron certainly has his work cut out for him, and failure is not an option.

John Sjoholm, Lima Charlie News 

[Edited by Anthony A. LoPresti]

John Sjoholm is Lima Charlie’s Middle East Bureau Chief, Managing Editor, and founder of the consulting firm Erudite Group. A seasoned expert on Middle East and North Africa matters, he has a background in security contracting and has served as a geopolitical advisor to regional leaders. He was educated in religion and languages in Sana’a, Yemen, and Cairo, Egypt, and has lived in the region since 2005, contributing to numerous Western-supported stabilisation projects. He currently resides in Jordan. Follow John on Twitter @JohnSjoholmLC

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