France: Reform with signalling effect

France is taking big steps towards the first important reform programme under the Macron administration: amending the strict labour laws. After months of preparation and negotiations with interested stakeholders, details were published yesterday. The catalogue of measures to reform the labour market is aimed at offering employers greater (financial) planning security in terms of redundancies. In addition, the plan is for working conditions to be negotiated by companies rather than at industry level in future. It is above all companies employing less than 50 people who stand to benefit from these changes.

These restrictions could also hold the key to political success. In contrast to his predecessor François Hollande, Macron has already included trade unions early on in the reform process – their protest against the plans has been quite modest so far, in French terms at any rate. Only a single trade union has announced that it will be organising a strike, while the others have been satisfied up to this point that it will not be made easier for businesses to dramatically cut staffing levels.

For Macron and France it is essential that these reforms will be successful. A glance at the President’s rapidly deteriorating polling figures reveals that he must pin his hopes on the success of these reforms setting the tone for the rest of his time in office. France has struggled for years under structural weaknesses which now need to be addressed as a matter of urgency. The impressive results recorded by the Front National under the leadership of the right-wing populist Marine Le Pen are also a reflection of the growing frustration in large parts of French society. The government’s comfortable parliamentary majority is both a blessing and a curse. If Macron wants to be successful, he must perform a successful balancing act in order to reconcile economic reason and societal consensus.

Macron will hope for support from Berlin in this regard. Only a Franco-German collaboration as equals will allow the Eurozone’s structural and institutional weaknesses to be addressed. Returning France to its former level of importance within Europe would be a real feather in Macron’s cap – so he is surely keen to lay the foundations for this to happen as well.  Macron has above all thrown his political weight behind his flagship project of creating a Eurozone Finance Minister who would have his own budget to promote investments throughout the Eurozone.

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