Macron on Track for Another Run at Revamping the French Economy

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(Bloomberg) — French voters will decide this month if they want to give Emmanuel Macron another chance to overhaul the country’s economic and social fundamentals.

The independent centrist won over the French in 2017 with promises to improve the business environment with tax cuts and encourage work with changes to labor and welfare laws. But after a flurry of action in the first year of his presidency, that reform drive was slowed by the Yellow Vests movement and brought to a halt by the Covid pandemic.

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Pollsters predict that after winning the first round April 10, Macron will likely face and beat nationalist candidate Marine Le Pen in the second round April 24. If they’re right, then these are the key policies that will shape France for the next five years — bearing in mind the war in Ukraine casts a shadow over the feasibility of some of his plans.

Fiscal Policy

► Taxes

The French leader says he would continue cutting tax rates to drive economic activity and lighten the fiscal burden on labor.

For businesses, he plans further cuts to levies on production and lower charges for the self-employed. For households, he pledges to abolish the television license fee and raise the ceiling for tax-free inheritance.

The cuts would cost the state a total of 15 billion euros ($16.5 billion) once fully implemented.

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► Spending

Macron plans to set aside 10 billion euros for the green transition, which would include renovating buildings, subsidies on electric vehicles and planting trees. Education and health are also in line to get a boost from public investment.

Combined with the tax cuts, the total cost of Macron’s program would reach 50 billion euros a year by the end of a five year term in 2027.► FinancesTo foot the bill, Macron says he has lined up the equivalent amount of cost savings. In the manifesto, there is little detail on specific measures under the broad headings of modernizing the state, cutting operating costs and curbing local authority spending. 

Overall, Macron’s team says the budget deficit would still fall below 3% of economic output by 2027, in line the forecasts of his current government. The plan is based on optimistic assumptions on growth and the impact of reforms on the country’s growth potential in the long run.

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Social Policy

► Labor

Macron is sticking to the mantra that guided economic policy making during his first term: make work pay. Some measures could prove popular, such as tripling the tax-free allowance for bonuses he introduced during the Yellow Vests protests, guaranteeing a childcare solution for all, bolstering profit-sharing mechanisms, or introducing more flexibility on vacation days.

Beyond those carrots to make work more attractive, there are also sticks that may prove red flags to France’s labor unions. Macron says he would add conditions to the minimum level of welfare and vary the generosity of unemployment insurance according to the strength of the job market.

According to the manifesto, the changes would drive unemployment down to 5% — a level not seen since the end of the 1970s.

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► Health

Macron wants to incentivize the production of medicine in France, after facing shortages during the Covid crisis, and organize a conference on how to make sure there are no “medical deserts,” areas without any doctors.

To boost the quality of life of older people, he wants to recruit retirees to give their time in a variety of areas, from helping children with homework to advising entrepreneurs. He also pledges to set aside 1,100 euros a month as the floor for pensions for those who have worked their all their lives. Following reports of mistreatment in care homes, he plans to recruit more carers.

► Pensions

When Covid plunged France into recession in 2020, Macron hit pause on his plans to overhaul pensions. The key difference in his new proposal is a clear pledge to raise the retirement age to 65 from 62 — something he’d excluded in his 2017 manifesto — rather than focusing on abolishing a multitude of sector-specific rules to create a single system. While he still aims for some simplification, the new plan no longer focuses solely on the unpopular idea of abolishing a multitude of sector-specific rules and advantages.

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The changes he proposes would do a lot of the heavy lifting for the rest of his economic framework by increasing revenues for the state, reducing spending and boosting the country’s growth potential. 

► Education

Of the 12 billion euro investment for education, half of that sum would go to increasing teacher pay for those starting their careers and those willing to change how and where they work. Schools would also get more organizational autonomy and greater power over hiring.  

Climate

Macron has made a clear commitment to nuclear power with a pledge to build six next-generation reactors. He also promises a 10-fold increase in solar power and the construction of 50 offshore wind turbines between now and 2050. That could involve the state taking over some of the assets of Electricite de France SA, Macron has said. 

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The manifesto also sets out regulations to improve carbon-footprint labeling of consumer goods and an obligation to tie executive pay to their company’s social and environmental objectives. Macron wants to renovate at least 700,000 homes a year to help cut energy consumption.

Security and Defense

Macron plans to continue bolstering on-the-ground policing with 200 new gendarme brigades in rural areas and action forces including teachers and magistrates for the poorest suburbs. To combat cyber-crime, the state would hire 1,200 specialists and create filters to warn internet users. 

To maintain military spending at 2% of economic output, he has outlined a plan to modernize the army with more jets, nuclear powered submarines, and armored vehicles. 

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Macron has pledged to “keep fighting radical Islam” by closing some mosques that don’t adhere to a charter on accepted behavior as well as expelling preachers and closing schools. He also wants to create a new border force and speed up the process for deporting people in the country illegally.

Foreign Affairs

Macron is adopting the pro-European Union stance that proved successful in the 2017 run-off against Le Pen.

In the name of strategic autonomy, he is calling for the EU to massively increase its defense capabilities and coordinate its national armies. He seeks to build a European version of the metaverse, a network of virtual, 3D worlds that U.S.-based Meta is working on.

Macron has made clear that Europe should keep the economic pressure on Russia following the war in Ukraine while avoiding verbal escalation against Vladimir Putin to keep all channels open for discussion. He also wants the bloc to move away from Russian oil and gas in the long term, and welcome a share of Ukrainian refugees.

Read more: France’s Stunning Economic Rebound May Seal Macron’s Re-ElectionHow Macron’s Campaign Got a Boost From Ukraine War: QuickTake

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