Decoding The French Presidential Poll Verdict And Victor’s ‘Macron-omics’

The election of Emmanuel Macron as the next President of France with 66 per cent of the popular vote has been welcomed as the next best thing after the sliced bread by “liberals” and eurozone supporters, both currently chafing under the uncertainties unleashed by the victory of Donald Trump in America, and the anti-Europe vote in Britain.

So, while the euro gained against the dollar yesterday (8 May), and Asian markets opened higher after the Macron landslide, the real euphoria is not about his win, but the defeat of National Front candidate Marine Le Pen.

David Cohen, writing in the anti-Trump New York Times exulted, claiming that Macron’s victory was the result of his “bold stand for the much-maligned European Union”. He also won without pandering to populism. “He (Macron) stood by refugees; he stood by Europe; he stood by Europe’s shared currency, the euro; and he was prepared to tell the French that they cannot turn their back on modernity and prosper.”

The problem with this kind of ra-ra analysis is that it works backwards from an overwhelming win to presume that people voted for all that the columnist wished for.

But there are two reasons to develop a more sober analysis of the Macron victory: the vote was not as overwhelming as it seems; and Macron’s economics is not good enough to lift France out of the trough of high unemployment (10 per cent plus against less than 5 per cent in exiting Britain) or low growth or an over-extended state. His policies, or what little we heard about them during the campaign, are only marginally different from what is already on offer.

Consider the mandate first. Macron won 66.1 per cent of the popular vote, against Marine Le Pen’s 33.9 per cent. He got around 20 million votes to Le Pen’s 10 million. But here’s the real number: 26 million people either did not vote or defaced their ballots. Nine per cent of those who voted defaced their ballots. Hardly an open-ended endorsement of Macron’s politics.

What is likely to have happened is that the defeated centre-right parties handed over their votes to Macron to keep out Le Pen in the final face-off. But more 45 per cent of French voters could not bring themselves to go and vote for anyone, and the positive endorsement for Macron – including the votes of those who wanted to keep Le Pen out – was just about 35 per cent of eligible voters. Is this really a mandate for change?

It is also clear that the elites voted for Macron, as the 90 per cent vote for him in Paris showed. In the Brexit vote too, the pro-EU forces won big in London, but failed elsewhere. Macron got his biggest votes in cities, and where unemployment was less than 10 per cent; Le Pen got better shares in areas with high unemployment and in sparsely populated rural areas. Broadly speaking, the better-off voted for Macron, the less well-off for his opponent.

A larger reason for Macron’s victory may be the realisation that the mainstream parties did not have solutions for France’s problems of low growth and high unemployment, and hence the willingness to bet on a newcomer. Macron formed his En Marche! party barely a year ago, and it is its freshness that may have helped it win. He had less political baggage to carry than his opponents.

As for Le Pen’s defeat, with nearly 34 per cent of the vote, all she needs is a Macron failure over the next five years to roar back in 2022.

The real problem for Macron is that campaigning with vague ideas can bring you victory, but in office you have to confront all the devils that have laid previous presidents and parliaments low.

Consider Macron’s vague ideas for regenerating France and Europe, as reported by the BBC.

One, he wants a common European budget and a common finance minister. This is easier said than done. It will need every EU country to accept that budgets and finance will be decided in Brussels, not Paris, or Berlin or Amsterdam or Madrid. Like the euro gamble, it will be years before the EU finds consensus on this idea. Also, federating fiscal powers upwards to Brussels means the EU will have to agree on higher transfers of resources from richer northern Europe to poorer southern Europe – something like India’s fiscal transfers to underdeveloped states. Can this happen when Germany is urging more austerity for the poor?

Two, he wants Germany to reflate, invest and spend more. This is a good suggestion, but, as noted above, the Germans have been busy suggesting that others embrace German levels of austerity and fiscal prudence rather than asking it to open the purse-strings. A Germany singed by hyper-inflation before the Second World War is extremely wary of fiscal looseness. Can Macron get German Chancellor Angela Merkel, who rooted for him, to change her mind, when she herself faces a difficult election later this year?

Three, Macron has promised to cut taxes from 33 per cent to 25 per cent in stages, and this is probably a promise he can deliver on if his party and centre-right groups manage to get a majority in parliament, where elections are due shortly. It would help companies retain more profits and resume investment. Among all promises, this seems most doable.

Four, Macron has promised to ease labour laws, but has declined to tinker with France’s 35-hour work week. He has promised to cut the number of government employees by 120,000 through natural attrition, but does not plan to increase the retirement age from the current 62. His budget cuts are supposed to save 60 billion euros over five years; this is far less radical that his first round rival Francois Fallon’s promise to cut 100 billion euros. Macron could well prove to be more of an incrementalist.

Five, France’s big state is not going to be dismantled by Macron. Public spending already accounts for 56 per cent of the gross domestic product (GDP), but Macron plans to increase unemployment spending by extending it far beyond the officially defined working class – to farmers, entrepreneurs and the self-employed. This is hardly going to help France meet its budget deficit commitment of 3 per cent of GDP, which it has missed more often than not, sometimes by huge margins.

The short point is this: Macron has won because he sounds fresh and new when voters were in a mood to avoid an extreme candidate and were tired of the old centre-right politicians. But he really has nothing out of the ordinary to offer France.

The chances are 50:50 that he too will flounder.