Now That Macron Has Won, What's Next for France?

Macron is the candidate of the pro-market, globalization-happy urban left and center.
05/07/2017 12:17 pm ET Updated May 08, 2017

I had the opportunity to speak with EconVue expert and renowned energy strategist Albert Bressand about the French presidential elections and beyond. In the aftermath of today’s historic election, here is some of our conversation:

EconVue: Emmanuel Macron has won with about two-thirds of the vote as of this evening. Does he now have a mandate from the French electorate, similar to Chirac in 2002, who ran against Marine Le Pen’s father?

Bressand: Chirac’s mandate was not a clear mandate. His 82% margin of victory was due to the ‘Republican Front’ vote against Marine Le Pen’s father —and, as a result, Chirac did not attempt much as President.

The real mandate for Macron, with so many people voting for ‘Anybody but Le Pen’ will come from the legislative elections in June. Under the French Constitution, and similar to the U.S., we have a system based on the balance of power. Macron’s new outsider party En Marche! is attempting to establish a majority, asking its candidates to resign from any party they may belong to now.  If Macron pulls that off this June, he has transformed the game. If not, he’ll have to concentrate on foreign affairs and a few other issues, leaving the Prime Minister from the winning party or parliamentary coalition to set the course on domestic matters. 

E: What are the fault lines in the new political landscape created by this earthquake?

B: First, the French Socialist party still suffers from never having renounced Marxism and anti-capitalism the way the German SPD Socialist party did at their Bad Godesberg Program in 1959. The dismal results of the official Corbyn-like, grassroots Socialist candidacy of Benoît Hamon is that it may lead to the anti-capitalist ‘revolutionary’ minority being weaned away at long last from the Social-Democratic majority. That said, both Left and Right are divided along the lines of acceptance of market-driven globalization, or its rejection or even demonization.

In that sense, Macron is the candidate of the pro-market, globalization-happy urban left and center. By contrast, Jean-Luc Mélenchon from the ‘France insoumise’ (France unbowed) party which got 19% of the first ballot vote, and Hamon who received just 6%, as well as a few minor candidates spoke for a large part of the French Left-a third of the electorate who still believe that unbridled ‘neoliberalism’ is the source of all problems in a country where public spending absorbs a hefty 56% of GDP.  

Le Pen speaks for sovereignty advocates of the far Right, but also for the same rural and working classes hurt and ignored by globalization in provinces like the North of France that had been Communist and Socialist strongholds. Altogether, half of the French electorate still remains unconvinced that private initiative and properly regulated markets can create more wealth in more hands than the monarchy-nostalgic state they call ‘état stratège’. 

E:  It sounds like young cosmopolitan urbanites versus displaced workers and farmers? 

B: Indeed, there is a strong network of open, globalized French cities where most understand that you have to move with the world, and globalize. This in true even in Lille, where Le Pen score was abysmal in the first ballot whereas she carried the rest of the Northern region handily. In the second ballot on May 7th, they will support Macron whether they come from left, center or right. Those in the countryside, the Rust Belt of France, support Le Pen. They would like to see the socialist system France has developed extended, and are inward facing in their concerns. So do ‘sovereigntists’ to borrow a Canadian-Quebequois term i.e. those who believe France should declare independence from Europe at a time when 80% of the decisions that matter are taken jointly by the EU 28 (soon 27) or the euro 19 nations—on energy, the environment, product norms, monetary policy, fundamental rights, competition law and state aid.

As for farmers, the level of regulations of all types is such that they lose their shirts selling milk at a price that German farmers find profitable—the French state and the Green Khmers intent on saving us from ourselves have pushed them to despair.

E: Macron claims to be ‘neither from the left nor from the right’. How is that different from traditional Social Democrats or centrists?

B: In a way, he is not. His model of France is deeply rooted in a state-centric society, in other words the existing elite, ‘meritocratic’ establishment, which educated him and moved him up very quickly within their ranks both inside the government and in banking. That said, he did his best to help Hollande make necessary reforms, most especially changes in labor laws that would make France more competitive with Germany. He understands this is key to putting an end to the polarization of the Eurozone between a club of Northern debtors and a club of Southern spenders.

Macron quit to form his own party because of Hollande’s inertia, his ambition—and, who knows, Hollande’s own green light. But he expresses a willingness to modernize some aspects of the French multi-layered social welfare system—like moving from 37 different pension systems to just one in which one euro contributed would buy the same benefit irrespective of which entity, public or private, you work for. Yet he pays respect to the sacred cows of the 35-hour week, the wealth-tax, and the bloated bureaucracy. Is this a shield to enable reform, or shackles that will keep any reform modest? Too early to say.

E: I was astonished to read that Hollande had only a 4% approval rating, but in spite of that his protégé now looks likely to win. Why wasn’t former Prime Minister François Fillon able to gain more traction on the right for the Republicans? For a while, he seemed to be the most viable candidate, as leader of the opposition.

B: Fillon, like many parliamentarians, looked at his administrative allowances as a source of revenue that could be used for members of his family working for him. After a long series of laws claiming to have ‘moralized’ politics, such complacency should have been dealt with, once and for all, years ago and system wide. Instead, the issue surfaced in a left-leaning satirical newspaper in the days that followed Fillon’s selection as the candidate of the right; the anti-money-laundering unit created and staffed by Francois Hollande opened an investigation on the day of the publication. The campaign Fillon had begun on the size of the public sector, the length of the work week, the age of retirement, and more, watered down into an endless debate on whether his wife had actually done the administrative work in question—an important issue, for sure, but one that may be less central to reversing a decade of loss of competitiveness and rising unemployment.

One is reminded of a book written by Norwegian-born Eva Joly, a candidate of the French Green Party in 2012, which observed that France has two judicial systems, one for ordinary people and one for the ruling elite. It’s not a matter of judicial independence –which is observed to the letter―but of proximity between the executive and judicial powers in a country that gave Montesquieu to the world and never reclaimed him.

E: How was Germany able to enact labor reforms, and become competitive?

B: When Gerhard Schroeder, Angela Merkel’s predecessor, came into power, Germany was the sick man of Europe. He joined ideological forces with Tony Blair, to create a German Third Way and tackled the German welfare state.  He was able to sell the idea of burden-sharing for the greater good.

E: So what is your prediction about Macron’s effectiveness?

B: Well, he has accomplished quite a lot quickly, and was rather successful as a private banking dealmaker in M&A with Rothschild’s. In the short term, many will be reassured. Macron is definitely a plus for Europe at a time when Brexit calls for a sense of direction and bold initiatives. A strong believer in the European project, one of his strongest points in his debate with Le Pen was to show her lack of preparation for the ‘FREXIT’ she advocates. But for France to compete effectively, reforms must be enacted longer term without undue accommodation to the sacred cows that eat the ordinary Frenchman’s grass.  A continuation of Hollande’s one step-forward, one backward, one-leftward and one in-tango, dangling style will be more than a missed opportunity. It will place France into the second league, which in turn will leave Europe rudderless and divided between high-performers and the also-rans.

E: So what is your optimistic view?

B:  Well, Europe has averted several disasters. We have checks and balances and institutions in place. Monetary policy, if seen in the aggregate, has steadied the course for the euro, and we are emerging from the 2008 financial crisis with stronger growth and significantly revamped banking and prudential institutions. The 1% has been exposed through the Panama Papers and the media, and small businesses energized. And populism is meeting its own glass ceiling.

E: And on the dark side?

B: Not everyone is benefiting from globalization, in fact some groups are suffering and are neither properly educated to face the challenges nor properly trained and supported to regain confidence in themselves. What I see as the darkest side is the state-supported inability of the French education system to teach people how the global economy works and why words like ‘performance’, ‘efficiency’, ‘competitiveness’ are part of the vocabulary of freedom and meaningful sovereignty. The better part of the intellectual class and the public-servant-dominated political class believe that a billion hard-working Chinese or Indians is a capitalist invention to pit peoples against one another and to steal the French from the French welfare state that is the envy of the world.

E: Any final words on the eve of the election? Is it a good thing to have a young president who can envisage a new Internet age, Fintech for example, and help create that future?

B: It’s not a matter of having a better tweeter in the Élysée Palace than, let’s say, in the White House. It’s a matter of helping all French learn to use a modern operating system. One that spends less time re-enacting old battles won or lost, and more time understanding what we can learn from the Indians, the Chinese, the Americans, and even from the Brits.

CONVERSATIONS