Observations of an expat: Macronian clouds on the horizon

The new French President is the latest international political darling, man of the hour and flavour of—well at least a month.

He is young, multilingual, charismatic, exceptionally well-educated and bright. When he speaks common sense pours forth as from an intellectually gifted Parisian fountain.

His election has saved—at least for now—the European experiment which was reeling from the body blow of Brexit. And when it comes to the politically important field of economics, Emmanuel Macron is one of the world’s top whizz kids.

BUT, just as every cloud has a silver lining, every blue sky has a thunder cloud over the horizon. In the case of France there are potential thunderstorms—foreign and domestic— which could wash away the new French optimism.

There is no doubt of President Macron’s Europhile credentials. At his first speech as president-elect, he ran onto the stage to the strains not of the French, but the EU’s national anthem Ode to Joy. He is, in fact, more of a Europhiliac than his more experienced German counterpart Angela Merkel. And that is the reason for the first cloud.

As a group, the Germans are pro-Europe. But they have started to baulk at the cost of propping up the poorly run Southern European Eurozone economies. This is despite the fact that the same cost has contributed mightily to Germany’s enviable trade surplus with the rest of the world.

Angela Merkel—and her main domestic political opponents—want a broad expansionist economic and political union that retains for individual countries a large degree of sovereignty over national economic policies. That is more or less a continuation of the existing set-up.

Not so Emmanuel Macron. His plan is for a deeper and wider economic integration between Eurozone countries. On top of that he wants EU reforms to reduce Germany’s trade surplus. To press the case, on Monday (22 May) he is dispatching his new Economy and Finance Minister Bruno Le Maire to Berlin for talks with German counterpart Wolfgang Schaeuble.

The Macronian European vision may also fail to find many adherents elsewhere in Europe. The hard-pressed Southern Europeans and the newly-joined East Europeans resent the German trade surplus. But they also want German subsidies and they jealously guard their sovereignty. On top of that, if Merkel is opposed then the rest of Europe is unlikely to bite the hand that feeds.

Macron’s Europhile credentials also make him unpopular with the Trump Administration. It was an open secret that the US president was rooting for anti-EU populist Marine Le Pen. Deeper European integration is a threat to Trump’s America First policy as a stronger trading bloc means a stronger and more difficult negotiator on the opposite side of the table.

The two men also have a problem over the issues of climate change and globalisation. On the latter issue especially, Macron is one of the world’s top proponents while Trump is at the opposite end of the spectrum.

However, Trump and Macron, will find common ground when they meet for the first time next week (Thursday) at the NATO summit in Brussels. Macron supports increasing French defence spending from 1.77 percent to 2 percent by 2020. He also plans to fight terrorism by boosting the police force by 10,000 and is committed to continuing French participation in the US-led coalition in Syria.

Foreign policies need a strong domestic base to succeed. Macron’s personal popularity and the inevitable honeymoon he is currently enjoying are—for the moment—providing him with that base. But the base is run through with hairline cracks that could easily—and disastrously—widen into fissures.

For a start, there is the fact that the election has exposed strong opposition on both the far left and far-right of French politics. The National Front’s Marine Le Pen and the communist-supported Jean-luc Melenchon polled the second and third largest votes respectively in the first round of the elections. And they have no intention of riding quietly into the political sunset. From day one they and their supporters will be busily chipping away at Macron’s domestic base.
And the new French president is vulnerable. Years of economic mismanagement have left France a financial basket case. Public spending is 56 percent of GDP compared to 44 percent in Germany,39 percent in the UK and 37 percent in the US. Even more staggering is the 10 percent unemployment level which rises to one in four of the population for those under the age of 25. On top of that there is the French mindset that failing industries, companies, unions—just about everyone in any trouble of any kind—should be propped up with public money.

Macron is determined to change that mindset and create a more pro-business and pro-entrepreneurial French economy. He plans to axe 120,000 civil service jobs—hopefully through natural wastage. Then he wants to relax the rules around France’s controversial 35-hour working week, reduce corporation tax from 33 percent to 25 percent and shift government money away from propping up failing businesses to paying for retraining programmes. Unemployment he wants to reduce to 7.7 percent by 2022.

All of this is a tall order given the French penchant for opposing any social change with strikes, riots, demonstrations, marches and walk-outs, all of which explains why successive French governments have started down the road of good intentions only to end up executing more U-turns than a Parisian taxi driver.

So, President Macron, enjoy your blue skies for now. You will need the memory.

* Tom Arms is foreign editor of Liberal Democrat Voice and the author of “The Encyclopedia of the Cold War” and the recently published “America Made in Britain” that has sold out in the US after six weeks but is still available in the UK.

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  • Britain needs a pro market, pro EU and pro globalisation party more than ever. The Tories appear willing to disregard their pro-market, pro-corporate and pro-globalisation credentials in favour of naked populism, protectionism and nationalism. Labour are as protectionist as it gets with their plans to renationalise and their anti trade and anti globalisation rhetoric. The Greens aren’t much better either.

    The British public need to be educated to the benefits of globalisation, free movement, finance capitalism and pro-market economics. We need to also ensure that we support people having appropriate skills to compete globally, rather than tolerate luddism – whether it is Labour’s love for inefficient steel plants, staffed railways and miners, UKIP’s white van and black cab brigade, or even the legions of IT and white collar workers seduced by the hard left and hard right because of job offshoring (which is inevitable and let’s be honest – welcome in a global economy).

  • @ stimpson “The British public need to be educated to the benefits of globalisation”.

    Revived classical economic liberalism in this party died (or rather committed harikari) two years ago, and its chief white knight took off to be vice president and corporate secretary at the Asian Infrastructure Investment Bank. It had previously been dispatched in 1906. It also may also have slipped your notice that the last colliery closed earlier this year.

    Unfortunately, the British public don’t like being patronised so I wouldn’t advise you to do that.

  • @Stimpson
    “The British public need to be educated to the benefits of globalisation, free movement, finance capitalism and pro-market economics.”

    Probably correct but at the moment and the foreseeable future, political suicide.

    It’s partly the inequalities resulting from globalisation that led to Brexit in the first place.

    Reducing inequality – well that’s another story.

    Anyone see the Simon Reeve programme looking at Columbia and Medellin particularly and how they turned one of the most dangerous cities in the world into one of the most vibrant in Latin America by investing in the poorest communities. Very interesting!

  • Oh please, Raw is right. Let’s throw the Orange Book to the dustbin once and for all. We should be the party of Keynes and Beveridge rather than the Washington Consensus.

    Besides, I have to say that Libdem plan needs to be more ambitious and needs more specific figures.

    – Expanding the British Business Bank. But by how much? £10bn, £20bn, £1bn or £500m? (well £500m or even £1bn means nothing)
    – Our long-term goal is to double innovation and research spending across the economy: If doubling R&D spending in absolute term not in percentage of GDP, then it is a shamble target. A commitment to increase R&D spending to 3% or even 4% is a far more clear and credible target. Also, Libdem failed to mention the deadline for the increase in spending (doubling spending by 2050 not 2020 would be a worthless target).
    – Britain’s indebtedness is caused by its perennial trade deficit. But Libdem had no plan for achieve trade balance/surplus.
    – Libdem shouldn’t have magically dropped its banking reform plan, especially when Basel III left shadow banking untouched.
    – Allowance for startups should be extended to a full year, as the second year, not the first year, is the crucial year for them.

  • However right I may be, John, I’m afraid I don’t know your surname.

  • Peter Martin 19th May '17 - 11:19am

    ” …. to Germany’s enviable trade surplus with the rest of the world.

    Is it really so enviable? Germany is accumulating euros which it isn’t spending. That’s the meaning of the word surplus. It is a mistake to compare the surplus of a country with the profit of a company. If it were spending them the life of the average German would be better than it is. There’s plenty of poverty in Germany too. Why not spend what euros you have and fix that problem?

    [EM’s]plan is for a deeper and wider economic integration between Eurozone countries. On top of that he wants EU reforms to reduce Germany’s trade surplus.

    He’s absolutely right. The EU is stuck in failed in-between state. It needs to either move forward to full integration or back to a collection of freely trading states each with its own floating currency.

    It’s easy to point to the failures of other EU countries but there can only be one Germany. Germany can only accumulate a surplus if other countries run deficits. Not everyone can be in surplus. There seems to be a blind spot on the part of German politicians about that simple point. Germany needs the deficit countries. Let’s hope “one of the world’s top whizz kids” can impart some elementary economics education into some very impervious Teutonic skulls!

  • Graham Evans 19th May '17 - 11:42am

    I guess those who dislike hearing the truth about their inadequacies who always interpret it as being patronised. Perhaps this is why as a country we’re in the current mess, with little prospect of improvement. If Macron can achieve only 25% of what he sets out to do, that will be a much more than May is likely to achieve in improving the competitiveness of the UK economy. Moreover, while taxes in France as a percentage of GDP may be much higher than in Germany or the UK, its productivity is still significantly better than that of the UK.

  • Graham Evans 19th May '17 - 11:51am

    @ Peter Martin. I see you actually know something about Germany and the problems created by its mercantile approach to economics. It’s a pity that this isn’t more widely understood by British commentators. Just as the UK seems to be turning to nationalism and rejecting globalisation, so the Germans continue to believe that all the EU’s problems can be solved if we all behaved like them. Both approaches fly in the face of the realities of international trade.

  • Peter Martin 19th May '17 - 12:11pm

    …..that will be a much more than May is likely to achieve in improving the competitiveness of the UK economy.

    You could be right. Certainly the UK economy does need some improvement. So why are we uncompetitive? I would argue that we have been suffering from a strain of Dutch Disease.

    ‘Dutch disease’ was term coined to describe the adverse economic effects felt by many parts of the Netherlands when large deposits of natural gas were found there in the 70’s. The money from the gas pushed up the value of the Guilder and caused many companies to be commercially nonviable. We saw something of that ourselves in the 80’s when North Sea Oil and gas pushed up the Pound’s value. Industries declined and workers became unemployed.

    But, in addition, we’ve seen a large concentration of financial sector so-called industries in London and the SE. This has meant that the share of national wealth from the rest of the country has declined. It doesn’t have to be money coming in from the sale of gas or oil. Money coming in for anything, and particularly the ‘hot’ highly mobile money coming in to the banks and finance industry generally can have the same effect.

    There is some fear that the people who some refer to unkindly as “banksters” will depart these shores after Brexit. I’ll say good riddance if they do go. We’ll be better off without them. I’m not including those who are genuinely working to finance the productive economy that still just about survives. There are still many of them and they will have no reason to leave.

  • A shift in German policy towards surplus sharing is not impossible. Persuading Merkel’s CDU primarily depends on France at last honouring its budget deficit commitment and liberalising its labour market. As the Commission expects France’s deficit to lower to 3.1% in 2018, the first target is well on the way to being met. Macron has made clear that achieving the second is his first priority.

    Macron’s gamble depends on commanding a majority in the new National Assembly. The careful composition of his government indicates this is now more than a possibility. At worst, he may need a coalition with the centre-right Les Républicains, whose main demand is likely to be for income tax reductions, which he’ll probably be happy to accept. The main risk to him remains street protests and strikes, but the effectiveness of this kind of threat has significantly declined over the last ten years or so.

    The Macron presidency, if its European platform is adopted by the EU, will have major implications for Britain. He is putting forward ‘Europe First’ proposals that are certainly being enthusiastically received in Brussels and there are indications they are being taken seriously in Berlin. The proposals would cover the many economic sectors not regulated by the World Trade Organisation. One example is defence procurement. Macron has appointed Sylvie Goulard (note: an ALDE MEP) who is an expert in the workings of the EU as Defence Minister; and Jean-Yves Le Drian, the widely respected former Defence Minister with a remarkable record in promoting French arms sales, as Minister for European and Foreign Affairs. The expertise of these new Ministers, working closely together, would serve to accelerate the move not only towards a united EU defence policy but also towards common defence procurement, strongly favouring, in line with Macron’s Europe First proposals, EU suppliers.

    A move towards surplus sharing would dynamise Europe’s economy whilst a Europe First policy would provide a degree of protection many, both on the left and right, would welcome. In contrast, post-Brexit Britain would be in relative decline as its businesses are gradually frozen out of the world’s largest trading bloc.

  • Lorenzo Cherin 19th May '17 - 2:02pm

    Macron is the best for France but he is whistling in the dark if he wants more integration, as is Guy V et al !

    Liberal Democrats everywhere need to see the second word as important as the first , and start listening to people, and see the first word as meaning more than libertarian self indulgence !

    Mike S is my man above, stimpson , everything in the marketplace , wonderful, David Raw, everything in the marketplace, horrible !

    We need to stop seeing everything as 1806, or 1906, 1845, or 1945,and realise this is 2017, and from here do what works !

  • Eddie Sammon 19th May '17 - 5:38pm

    What Macron’s done is amazing, but the French haven’t bought all of his programme. I expect a showdown with the trade unions over his labour law reform proposals.

    On the EU, he seems to recognise it’s in France’s interest to support a united Europe, and we need to learn how to get the same message across to Britain, but it won’t work by being too pessimistic about Britain.

    The new French government looks like a good balance of people from the moderate left to moderate right, but there is one radical environmentalist that people think could cause conflict in the cabinet and was a risky choice, but Macron wanted to re-affirm his environmental credentials.

    France seems like an optimistic place right now, we need to create a similar optimism in Britain, but the far left aren’t happy with the new French government. Mélenchon is painting his Insoumis movement as the real opposition, socialists versus liberals, and I suspect he will have more success than Le Pen, but we will see, who wants to paint the divide between liberals and “patriots” (nationalists, in reality).

    Macron has been accused of making French politics explode with his ministers from centre-left to centre-right right. He has done well, albeit he benefited from luck with François Fillon’s campaign being a disaster tarred with corruption investigations.

  • @ Lorenzo “stimpson , everything in the marketplace , wonderful, David Raw, everything in the marketplace, horrible !”.

    That’s even more exaggerated than usual, Lorenzo, although your comment on Monsieur stimpson est precis.

    Just for the record I believe in a mixed economy with a Beveridge/Keynesian emphasis – in short a traditional radical Liberal.

    PS. Your pal C-B wouldn’t agree with you on faith schools. He campaigned against the 1902 Education Act when this Party still had a Nonconformist conscience.

  • Peter Martin 19th May '17 - 8:58pm

    A shift in German policy towards surplus sharing is not impossible

    Neither is a Lib Dem majority in the June election! I wouldn’t be holding my breath on either happening though.

    Which is a pity for the EU on both counts. But mainly the former. If German politicians doesn’t understand how a common currency has to work then there is really no hope.

  • Simon Banks 28th May '17 - 9:30am

    That Macron will be at odds with Trump is no bad thing for Macron’s domestic popularity or for the world.

    One difficulty for Macron is that unlike any previous President of the Fifth Republic, he won’t at least start with a majority of his party supporters in the National Assembly. Previous Presidents arriving to face a contrary majority have all won a majority after dissolving the Assembly, thus increasing their authority. Macron and his chief lieutenants will have to cut deals to achieve majorities – so it could come to seem like the Third and Fourth Republics returned. The difference of course is a strong, directly elected President – but it will take good footwork from Macron to seem strong and achieve things.

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