After what Le Monde compared to a “long episode of House of Cards,” the parliamentary arithmetic just looked too tight for an increasingly isolated Macron. Not only did natural allies on the center-right fail to back him, but Macron’s own centrist bloc cracked under the pressure of conflicting political sympathies and aspiring presidential contenders to replace Macron in 2027. The unity of trade unions opposed to the reform meant there was little chance of dividing and ruling. And the absence of an anarchic Yellow Vest movement has kept public support for strikes high.
Macron’s high-stakes bet is that this reform is too crucial for France’s economic credibility to risk being shot down in parliament. That may be right, but it has the upshot of poor democratic optics and bad economic timing, coinciding with Christine Lagarde’s own fight for credibility in keeping a lid on runaway inflation as the European Central Bank jacks up interest rates. That risks adding a credit crunch to a gridlocked economy, with unions calling for renewed strike action to keep the pressure on the government.
“The fallout from pension reform risks increasing social unrest at a time when the economy is slowing,” says Barclays Plc economist Philippe Gudin. “If it persists, it will have an economic impact.” After barely growing in the fourth quarter, the French economy is set to contract 0.1% in the first quarter, according to a Bloomberg economist survey conducted March 3-9. French PMIs are only just in expansion territory, and bankruptcies are on the rise. Strikes are far from the only problem, but they won’t help.
So while this is technically a win for Macron, who wants to revive his yen for reform after a pandemic-era deficit splurge, it doesn’t feel much like one. His party troops are demoralized, his approval ratings are at a three-year low and his Prime Minister Elisabeth Borne now faces a no-confidence vote in parliament. Far-right leader Marine Le Pen is widely expected to benefit the most from the chaos, while far-left firebrand Jean-Luc Melenchon stokes the fire of protests. The cliche of a stubborn and un-reformable Gaul is back.
There are some optimistic signs on the horizon, to be sure. Macron’s bid to prod the European Union into a more independent, integrated direction — despite mounting policy disagreements between Paris and Berlin — might be yielding results. The EU this week unveiled a raft of new measures aimed at nurturing green tech and securing raw materials to keep up with the US and China’s increasingly protectionist growth race. The euro area needs investment, and more integration will help.
Yet European ambitions may only serve to highlight the domestic quagmire of Europe’s No. 2 economy. Even as Macron gave diplomats a boost with more funding this week, the dirty business of Parisian garbage remains unsolved. With some 9,000 tons of waste have yet to be collected, the police are set to requisition striking collectors in the name of public health. Working longer and retiring later has a price; so far it’s Macron who’s paying it.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the European Union and France. Previously, he was a reporter for Reuters and Forbes.
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