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Stage set for Macron’s ‘second Act’

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Emmanuel Macron began his summer holiday at the Fort de Brégançon, the French presidential retreat near Toulon on the Mediterranean Sea, in an uncharacteristically humble and reflective mood.

“I don’t think at all that the conditions which prompted real anger from a part of the population are behind us,” he said during a walkabout in the nearby village of Bormes-les-Mimosas. “There are profound problems in our country linked to injustice and the economic difficulties that have been around for a very long time.” A few days later, in early August, the French president and his wife Brigitte dined at a nearby pizzeria.

With this studied attempt to shake off his reputation as an arrogant “president of the rich” following months of sometimes violent gilets jaunes protests across France, Mr Macron was acknowledging his failure to heed public resentment toward some of his economic reforms since 2017 — and over the thoughtless way they were often imposed.

Yet the plethora of announcements and speeches by the sun-tanned Mr Macron on his return to Paris at the end of August and his deft hosting of the Group of Seven summit of advanced economies in Biarritz suggest he has lost little of the ambition — to transform France and shape European foreign policy — that he displayed in the first half of his five-year mandate.

Next on the list of wrenching domestic reforms are a plan to simplify the pensions system while extending the working life of the French, and another to slim down the 5.5m-strong civil service — although both reforms have been markedly softened in recent weeks to avoid antagonising the electorate before local elections next March.

People throw an effigy of French President Emanuel Macron into a sheet, a local carnival tradition, during a protest of Yellow vests (Gilets jaunes) against rising oil prices and living costs, in Nice, southeastern France, on December 15, 2018. - The "Yellow Vests" (Gilets Jaunes) movement in France originally started as a protest about planned fuel hikes but has morphed into a mass protest against President's policies and top-down style of governing. (Photo by YANN COATSALIOU / AFP)YANN COATSALIOU/AFP/Getty Images
People throw an effigy of Emmanuel Macron into a sheet, a local carnival tradition, during a ‘gilets jaunes’ protest in Nice, southeastern France, last year © AFP

“Macron is back,” says Ronald Tiersky, a historian and author on French politics, as the president begins what is known in Paris as Act 2 of his administration. “I think he looks strong and he feels confident.”

As recently as the spring, politicians and analysts were asking if Mr Macron’s presidency was “fatally compromised”, says Mr Tiersky.

Thousands of angry gilets jaunes demonstrators were clashing with police each weekend, in an uprising that began in November 2018 as a protest against green fuel taxes and evolved into a broad anti-establishment movement that elicited sympathy even from those who played no part. Hundreds were injured.

Protesters reserved particular venom for Mr Macron, the 41-year-old former Rothschild investment banker. For a time at the end of last year, he seemed to lose his usual ebullience and eagerness to appear in public. “What surprised me was how much and how quickly he became hated,” says Mr Tiersky.

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The gilets jaunes protests are not over — those who seek to lead the inchoate movement have promised a big demonstration for the first anniversary on November 17 — but the marches diminished in size before the summer and several were hijacked by black-clad extremists whose attacks on shops, public buildings and the police undermined the movement’s credibility.

Mr Macron’s return has also been eased by the recent performance of the economy: France is less exposed to the damage from US president Donald Trump’s trade wars than Germany and appears to be benefiting from the first phase of reforms launched soon after Mr Macron and his La République en Marche (LREM) party won the presidential and legislative elections in 2017.

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“Government reforms are beginning to pay off for our fellow citizens,” said labour minister Muriel Pénicaud after the unemployment rate fell to a 10-year low of 8.5 per cent in the second quarter — 8.2 per cent if France’s overseas territories are excluded.

Canadian Prime Minister Justin Trudeau, second from left, sits between British Prime Minister Boris Johnson, left, and German Chancellor Angela Merkel as they take part in a meeting at the G7 Summit in Biarritz, France, Monday, Aug. 26, 2019. Gesturing at right is French President Emmanuel Macron. (Sean Kilpatrick/The Canadian Press via AP)
Canadian Prime Minister Justin Trudeau, second from left, sits between UK Prime Minister Boris Johnson, left, and German Chancellor Angela Merkel as they attend a meeting at the G7 Summit in Biarritz, France, on August 26. Gesturing at right is Mr Macron © AP

Ms Pénicaud, a former human resources director of Danone, was chosen by Mr Macron to tackle the perennially high unemployment by making it easier and cheaper for employers to hire and fire, and allocating €15bn on training. “Many jobs, particularly permanent ones, have been created because companies, especially small ones, are no longer afraid to hire,” she said.

Economists say Mr Macron’s target of cutting unemployment to 7 per cent by the end of his term in 2022 — from 9.7 per cent at the start — is now within reach. The economy as a whole has so far grown steadily, if not spectacularly, despite the slowdown in Germany and the disruption from an imminent Brexit. Gross domestic product is forecast to grow 1.3 per cent this year.

Macron supporters say they have an undimmed appetite for reforming the economy in a consistent way that his immediate predecessors François Hollande and Nicolas Sarkozy from the left and right notably failed to do, although they acknowledge that the gilets jaunes have convinced them of the need to listen more carefully to voters.

French Labour Minister Muriel Penicaud leaves after a meeting on the preparation of France for Brexit, the Britain's exit from the European Union, at Hotel Matignon in Paris, on January 17, 2019 - The French government has activated its plans for handling the effects of a no-deal Brexit, which has become "less and less unlikely", Prime Minister Edouard Philippe said. (Photo by JACQUES DEMARTHON / AFP)JACQUES DEMARTHON/AFP/Getty Images
French Labour Minister Muriel Pénicaud leaves after a meeting on France’s preparation for Brexit, at Hotel Matignon in Paris in January © AFP

“We are not slowing down on reforms at all, nor renouncing our ambition,” Gilles Le Gendre, leader of the LREM deputies in the National Assembly says. “Macronism means just that — an ambition to transform, to put the country back on the right track. Pensions will probably be the most emblematic and important reform of the five-year mandate. But the gilets jaunes made us realise that we had to be much more careful in the way we guided these reforms.”

Mr Macron has expressed the same urge to deepen his reforms but to enact them “with the French rather than for the French”. He told journalists recently: “We must not reduce the ambition for the transformations that the country needs, but in terms of method we must do more to include French men and women.”

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France can be notoriously difficult to govern, let alone reform, given the prickliness of French voters who may simultaneously harbour revolutionary feelings against the establishment and hold deeply conservative views about the nation, the state and its institutions. Among the contradictions of many gilets jaunes marches were their combined demands for lower taxes and more government spending on social services and infrastructure.

Given this unpromising political landscape, Mr Macron is credited — by economists, analysts and many business leaders — with a series of successful reforms to the tax system, the state railways and the labour market, including adjustments to the notoriously generous unemployment benefit system, which have encouraged investors.

Asked what had changed in the country since Mr Macron’s rise to power, Zaki Laïdi, professor at Sciences Po, says: “The climate. Confidence. For the first time there have been actions to match the promises. The possibility of doing business in France has considerably improved.”

The obligatory political book that Mr Macron wrote to accompany his election campaign suggested something bigger. It was called Revolution: Reconciling France, but the economic record shows him to have been determined and methodical rather than revolutionary — and until now not very conciliatory.

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Mr Laïdi says Mr Macron believes in reform “à la française, and that means a big public service and big public spending”. The French, he says, remain wary of globalisation and attached to the idea of the state “because the state is the producer of identity — so if you attack the idea of the state you attack what it means to be French”.

MAXPPP OUT Mandatory Credit: Photo by LUDOVIC MARIN/POOL/EPA-EFE/Shutterstock (10379812b) French President Emmanuel Macron (R side, middle) chairs the government's weekly cabinet meeting at the Elysee presidential palace in Paris, France, 04 September 2019. French Government's weekly cabinet meeting in Paris, France - 04 Sep 2019
Mr Macron chairs the government’s weekly cabinet meeting at the Elysee presidential palace on September 4 © EPA

This reading of events helps explain why Mr Macron, for all the talk of persisting with the transformation of France in the second half of his mandate, has in recent weeks visibly slowed the pace of several key reforms.

Instead of forging ahead with his planned shake-up of the pensions system, which will inevitably involve increasing the retirement age for many, Mr Macron has promised months of public consultation first. Instead of slashing jobs in the civil service — as recently as March the government envisaged the loss of 120,000 jobs over the next three years — ministers have suggested that only about 15,000 jobs are at risk.

Mr Macron remains vulnerable to criticism from many quarters: from the far-right for failing to control immigration, from the left and the gilets jaunes on the streets for ramming through some of his economic reforms, and now from conservative republicans for failing to limit public spending. He is now having to navigate, more cautiously

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His softer approach in recent weeks does not mean Mr Macron is doing a complete U-turn on reform — he has resisted gilets jaunes demands that he reintroduce the wealth tax that discouraged the rich from staying and investing in France — but it has severely blunted the attempt to cut public spending and control public debt.

“The blind spot is debt and the level of public spending”, says Mr Laïdi, “although it is attenuated by the fact that the cost of debt service is very low”.

Indeed, one reason for the relative strength of economic growth is that by some estimates the Macron government has injected an extra €25bn — or about 1 per cent of GDP — into the economy since he took office, much of it in response to the gilets jaunes crisis. The spending boost has led economists to predict that France’s budget deficit this year will breach the EU’s limit of 3 per cent of GDP.

“The fiscal stimulus has been huge,” says Daniela Ordóñez, chief French economist at Oxford Economics.

It is French politics, rather than the country’s economy, that Mr Macron has truly revolutionised following his insurgent election campaign from the previously feeble liberal centre in 2017.

He served as finance minister under Mr Hollande until he ditched the Socialist leader to launch his own campaign, and has since crushed the traditional parties of the French left — the Socialists and the already struggling Communists. More recently, he has swept away the Republican right, leaving Marine Le Pen and her far-right Rassemblement National (RN, the renamed Front National) as his main challenger.

Frustratingly for Mr Macron, the RN narrowly beat his alliance in the French vote in the European elections in May. But he knows he can beat Ms Le Pen in a two-way domestic contest — as he did in the second round of the 2017 presidential election — and has, since May, focused his efforts on announcing environmentally friendly policies to win over young voters who heavily backed the French Greens in the European poll.

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French Prime Minister Edouard Philippe (C) and French Education and Youth Affairs Minister Jean-Michel Blanquer (C,R) pose with teachers after attending a presentation of new teaching methods at the Val d'Argens "polyvalent" high school in Le Muy, south eastern France, on August 30, 2019. (Photo by Yann COATSALIOU / AFP)YANN COATSALIOU/AFP/Getty Images
Prime Minister Edouard Philippe, centre, and French Education and Youth Affairs Minister Jean-Michel Blanquer, centre right, pose with teachers after attending a presentation of new teaching methods at the Val d’Argens ‘polyvalent’ high school in Le Muy, south eastern France, last month © AFP

Although he operates from the political centre, opinion polls suggest that Mr Macron remains a paradoxically divisive figure across the political spectrum — even if he is less unpopular than any plausible alternative president.

Yet he has clawed back all the ground lost since the first big gilets jaunes demonstration last November, according to an Ifop poll for Le Journal du Dimanche that showed his approval rating at 34 per cent in August, well above the low of 23 per cent at the peak of the protests. By September it had risen to 38 per cent.

“The advantage of Macron is that he learns very quickly. He bounces back,” says one French lobbyist. “And there’s no one else.”

Chastened by the gilets jaunes demonstrations, Mr Macron has delegated more of the tasks of consulting on and implementing reforms to his prime minister, Edouard Philippe. But he has not lost his appetite for change.

“I don’t think you can say he’s relaxing,” says Stéphane Carcillo, head of the jobs and income division of the Paris-based OECD. “I think 2020 is still going to be a year of reforms.”

Iran and Ukraine initiatives underpin bolder strategy

While President Emmanuel Macron has recently adopted a more cautious approach to implementing reforms in France, he has grown bolder in foreign policy — simultaneously seeking to make peace between Ukraine and Russia and resolve the crisis in the Gulf over Iran’s nuclear ambitions.

He has become the west’s most prominent international problem solver partly by force of will — he says France and the EU need to stand up for democracy and their economic interests in the face of growing commercial and strategic rivalry from China and the US — and partly through circumstance: Donald Trump is notoriously erratic; the UK is obsessed by Brexit; and Angela Merkel’s influence as German chancellor is fading fast.

In hosting the G7 summit of rich democracies in August, Mr Macron adopted a high-risk strategy on Iran and Ukraine, while also seeking to calm the world’s trade disputes, mobilise efforts to stop the fires sweeping through the Amazon rainforest and tackle crises in Yemen, Syria, Libya, the Sahel and sub-Saharan Africa.

In the face of stiff opposition from hardliners in Washington and Tehran, he persuaded Mr Trump to announce that he was ready to meet Hassan Rouhani, his Iranian counterpart, if the circumstances were right. Difficult negotiations are under way to try to reduce tensions in the Gulf, ease US sanctions against Iranian oil sales and bring Tehran back into compliance with its commitments to curb its nuclear ambitions.

On the Ukraine conflict, Mr Macron’s diplomacy has set the stage for the first summit in three years between the four parties charged with ending the war waged by Russian-backed separatists in eastern Ukraine — the two belligerents plus France and Germany.

Via Financial Times

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