Macron gambles everything on genuine economic reform

Macron gambles everything on genuine economic reform

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After last week’s lambasting of the do-nothing Angela Merkel era, it is with pleasure that we now turn to French President Emmanuel Macron, who is gambling everything in the hope of reforming the seemingly unreformable French Fifth Republic. To truly understand the importance of the Elysee’s struggle with the French street over pension reforms — historically the third rail of politics there — it is necessary to see the world through Macron’s eyes.

Hardened technocrat that he is, the French president is at least — unlike the vast majority of so-called leaders on the continent — capable of understanding math; and the arithmetic in Europe is far from pretty. The euro zone only grew at an anemic 0.2 percent (quarter-on-quarter) in the third quarter of 2019, with both powerhouse Germany and Italy teetering on the edge of recession. Europe’s signal failure to grow at a marginally acceptable rate consistently for decades now marks the continent out as being in absolute decline.

But Macron, analyzing things clearly, is not yet ready to go gently into that good night. Seeing that Merkel’s Germany has long been an intellectual black hole; that deeply divided Spain is engulfed in a series of endless, inconclusive elections; that Italy is on the economic ropes; that rightist, populist Poland is in open revolt against Brussels; and that Britain is heading for the door, Macron rightly senses a political opportunity for France to punch far above its economic weight.

But before he can lead Europe into an era of economic, strategic and political reform, he must first prove that he can lead unruly France. Already, the Elysee has accomplished something once unthinkable in the French Fifth Republic: He has introduced genuine labor market reforms and withstood the considerable wrath of the French street. But this was not enough to convince the static German chancellor to jointly move on real EU-wide reform. So now Macron has once again picked up the dice, betting his presidency and his highly ambitious reform agenda on tackling what has long been seen in French politics as too controversial: Pension reform.

On its face, the intellectual case for such a modern-day adjustment is irrefutable. But then logic has never been the strong suit of French unions; long one of the most economically reactionary forces on the continent. The government is attempting to unify a fragmented pension system, wherein there are fully 42 special deals for various cosseted state sectors of the economy, allowing them to retire at comically early ages that are simply not sustainable in the new era of globalization we find ourselves in. On average, French workers retire at 62, with a publicly funded pension equal to 74 percent of a worker’s final salary. This compares with Britain, where workers walk away with only 29 percent of their final wage.

Before he can lead Europe into an era of economic, strategic and political reform, he must first prove that he can lead unruly France.

Dr. John C. Hulsman

Macron’s reforms, in merely doing away with the antiquated exemptions and creating a universal pension system including both public and private sector workers, will only inch the average retirement age up to a still unaffordable 64, but it is a step in the right direction. At base, Macron’s pension reform signals an effort to change the course of French economic history, fulfilling his campaign promise of delivering nothing less than the biggest transformation of the French social model and welfare system in the post-war era.

Doubling down, Macron has reportedly said that he ought not to even run for re-election in 2022 if the reforms are not passed. While this is surely an example of the man’s characteristic flamboyance (so refreshing after the decade-plus of the colorless Merkel), there is strategic truth in what he says.

A Macron emboldened by genuine economic reforms of a country that was thought by many to be utterly incapable of such a transformation would by rights claim the leadership of a moribund Europe. Having grasped the economic nettle at home, Macron would be unchained, possessing the authority to lay claim to pressing for Europe-wide reforms: Establishing a genuine finance ministry, having (from now on) some form of mutualized common debt, and working to move more in tandem geostrategically. A reformist champion could lead such an effort; a reformist failure could not.

So, for Macron, everything is riding on the coming tumultuous months. Ironically, French unions agree with almost the whole of Macron’s assessment, despite the fact they come to very different conclusions about what is to be done. Strikingly, even ahead of the government’s announcement of the exact terms of the pension reforms this week, many unions had already gone out on strike — with fully 800,000 joining their protests — hoping to strangle the pension reform at birth.

The French people remain on a knife’s edge as to who they support. An Ifop poll of Dec. 5 found that a bare majority of 53 percent supported the strikers, while a large 76 percent majority backed the general idea of pension reform.

While the British election fallout looms and the loud drums of impeachment are heard from Washington, it is actually Macron’s climactic showdown with the French street that may be the single most important political risk story of this wintry December.

  • Dr. John C. Hulsman is the president and managing partner of John C. Hulsman Enterprises, a prominent global political risk consulting firm. He is also senior columnist for City AM, the newspaper of the City of London. He can be contacted via
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