MS Risk Blog

France Has Chosen the EU: Next Challenges for President Elect Macron

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Centrist candidate Emmanuel Macron won the second round of the presidential election on 7 May. The first official results from the Interior Ministry show that Macron received around 62 percent of the vote, versus 34 percent for nationalist candidate Marine Le Pen. This victory can be seen as a breath of fresh air for Europe, as had Le Pen prevailed in Sunday’s vote, she could have helped set in motion the bloc’s crumbling, even if her most radical proposals, such as holding a referendum on France’s Eurozone membership, would have been difficult to implement.

Le Pen’s performance in the election suggests that although Euroskepticism is strong in France, the prospect of leaving the bloc still frightens more voters in the country than it attracts. Nevertheless, the fact that the National Front secured 34 percent of the vote means that the economic and financial risk will continue to be of primary concerns among the most part of the citizens. Macron has a formidable task ahead of him. His presidency will test whether a centrist, pro-European leader can govern France and whether an inexperienced politician can perform better than the professional politicians his campaign criticized.

As far as domestic reforms are concerned, overhauling France’s economy is vital to the Macron plan. In the next five years he wants to make budget savings of €60bn (£51bn; $65bn), so that France sticks to the EU’s government deficit limit of 3% of GDP (total output). Public servants would be cut in number by 120,000 – through natural wastage. Concerning the Labour market, he would not scrap France’s famed 35-hour work week, but he would try to introduce further flexibility around a basic legal framework of labour rights and rules, allowing firms to negotiate deals with their staff on hours and pay.  He would try to introduce further flexibility around a basic legal framework of labour rights and rules, allowing firms to negotiate deals with their staff on hours and pay. On immigration, he aims at creating a 5,000-strong force of EU border guards, make fluency in French the main qualification for obtaining French nationality and give all religious leaders comprehensive training in France’s secular values.

However, some of Macron’s proposals, especially those aimed at further liberalizing France’s economy, reducing the public sector and introducing more flexible labor laws, will meet with resistance from some parts of French society, including unions and student groups. If En Marche! fails to win a majority in the National Assembly in the country’s legislative elections next month, the president will have an even harder time enacting domestic reform. His predecessors Nicolas Sarkozy and Francois Hollande found it difficult to introduce economic reforms even with control of the legislature because of opposition, not only from the public but also from their own parties at times.

On Europe, preserving France’s alliance with Germany, will be a priority for the next administration in Paris, and for Berlin as well. The two countries will probably be on the same page on the Brexit issue, defending the indivisibility of the European Union’s single market and ensuring that the United Kingdom doesn’t get too favorable a trade deal from the bloc. They will also work together to increase defense and security cooperation across the European Union, focusing on protecting its external borders, Macron is also a critic of Russian policy and backs EU sanctions put in place after the Ukraine crisis.

Still, Germany and France will have plenty of room for disagreement, especially where the Eurozone is concerned. Paris, broadly speaking, is willing to tolerate inflation and a cheap euro to keep Europe’s exports competitive. France also tends to take a flexible stance on deficit and debt targets, while espousing protectionism to defend vulnerable sectors of the economy, such as agriculture, against external competition. Many of these ideas go against Germany’s interests. For example, Macron has already proposed creating a separate budget for the Eurozone, financed by jointly issued debt, to pay for investment programs across the currency area. He also wants more shared responsibility within the eurozone and believes Germany’s big trade surplus has to be rebalanced.

There are many challenges ahead for the new President, and it is going to be a long way to go. Most of his success both nationally and internationally will depend on the French Assembly’s support and on the reestablishment of the traditional strong alliance with Germany.