Cash & Liquidity ManagementInvestment & FundingEconomyMacron’s economic reforms likely to be slow

Macron’s economic reforms likely to be slow

France’s next president faces a variety of obstacles, but is helped by the country’s slow but steady growth.

France’s next president, Emmanuel Macron, has promised a slow but steady approach in reforming the economy, with the success of his agenda dependent on reaching accord with the country’s powerful unions.

Macron, a former investment banker, is helped by France’s steady, if slow, pace of economic growth since the 2008 global financial crisis. Last year, under socialist Francois Hollande, growth picked up to reach 1.1% although momentum slowed in the first quarter of 2017 with a figure of 0.3%.

The president-elect, who twice quit Hollande’s government through frustration with its slow progress on reforms, has pledged to overhaul France’s labour market, simplify its tax and pension systems and cut back on the red tape and regulation that he says hamper innovation.

However, his agenda is based on shrinking the role of the state, which is at odds with a sizeable majority of France’s voters who would instead prefer it to be expanded.

Macron plans to cut government spending by €60bn over five years, a less ambitious target than the figure of €100bn that was proposed by former prime minister Francois Fillon, who exited the presidential contest after the first round. France’s rate of corporate tax would be gradually reduced from the current 33% to 25%.

Fillon’s agenda also included raising the working week for those in the public sector. Macron doesn’t plan similar moves, but instead wants to streamline France’s pension plans over time by moving to a Swedish-style points system in which payouts are tied to contributions people pay in during their working lives.

Unlike his opponent in the second round of the presidential contest, Marine Le Pen, the incoming president wants France to remain in the eurozone, but reform it. His election manifesto called for both a common eurozone budget and a eurozone finance minister.

He also will ask German chancellor Angela Merkel to step up investment and spending to boost Germany’s domestic economy, which he hopes will also help French exporters and manufacturers in other European countries.

According to the incoming president’s chief economic adviser, Jean Pisani-Ferry, Macron will adopt a tough line in the UK’s negotiations on leaving the European Union (EU), but is against a ‘hard Brexit’. Following the referendum last June, Macron described the result as a “crime” and suggested that the UK should be punished with a “total exit”.

However, Pisani-Ferry – who is tipped for appointment to a senior role in Macron’s government – said that the UK and Europe had a “mutual interest” in maintaining economic prosperity.

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