Emmanuel Macron will address the nation in a televised interview Tuesday night © Reuters

Emmanuel Macron faces the formidable task of rallying the French people behind a credible long-term economic plan in a climate of high uncertainty. 

Tuesday’s joint interview with the country’s main broadcasters will be the first time France gets a detailed idea of what the policy approach of the new government, led by premier Jean Castex, will be. 

The forbidding backdrop is that France’s public finances are among the most devastated in Europe by Covid-19. Mr Macron needs to show he is ready to shield the economy from a possible pandemic second wave, while also beginning the process of long-term repair. 

Some of the elements are already known. Along with weighty stimulus programmes to fight youth unemployment, jump-start the green transition and boost digital technologies, Mr Castex is also going to revive controversial pension reforms that were one of the defining battles of Mr Macron’s pre-pandemic years. But this is likely to be done in a cautious way that appeases more moderate unions and avoids the social unrest that brought France’s rail network to a standstill in the winter of 2019. 

Bruno Le Maire, France’s finance minister, told reporters in Brussels on Friday that continuing at all with the reform in the current climate was an act of political “courage” that embodied the government’s approach to the recovery.

“It would have been much easier to hide it under the carpet . . . to say it’s too difficult, forget it,” he said.

The minister also made clear that long-term investment in the economy and fiscal support for the manufacturing sector were the priority, rather than giving consumer demand a short-term shot in the arm through generalised tax cuts. 

“It would be much more popular, for example, to say that we were going to massively reduce taxes for households — it’s more popular than saying we want to reduce taxes on production,” he said. “It’s just that lowering taxes on production, like I have wanted for three years and like we are going to do, in particular for manufacturing, ensures reshoring [into France] and industrial value chains in France.”

But Mr Macron needs to find some popularity somewhere. In Mr Castex, a self-proclaimed “social-Gaullist” and mayor from France's deep-south, the president believes he has found someone who can lock in the centre-right vote while also rubbishing the claim that his administration is dominated by Parisian elites.

But at the same time, he wants this government’s successes to clearly be his own: to underline the point, Mr Castex’s presentation of his work programme to parliament will come only on Wednesday, the day after Mr Macron’s Bastille Day interview. 

Part of the job of that programme is to widen Mr Macron’s coalition to embrace supporters of the greens, whose surge in this year’s municipal elections is a sign of the country’s broader political realignment. Mr Macron’s calculation is that, if he can make that connection, then he can enter the 2022 presidential race with reform achievements, a clear programme and a rebounding economy.

The European Commission predicts that the French economy will grow by 7.6 per cent next year, more than any other EU country — but still not enough to eclipse this year’s recession. 

And that number, like the prospects for the rest of Mr Macron’s term, is still shrouded in doubt.

jim.brunsden@ft.com; @jimbrunsden

Chart du jour

Maps showing the results of the Polish second round elections

Small towns and rural areas delivered the votes to re-elect Poland’s conservative-nationalist president Andrzej Duda in a close run-off against centre-right rival Rafal Trzaskowski. Mr Duda won by exploiting deep political and societal faultlines that are unlikely to go away soon. They could also provide the ammunition for the next round of political infighting in Poland — and put further strain on the frayed relations between Brussels and the EU’s sixth-biggest economy. (FT)

Planet Europe

Brussels wants to invoke treaty article that would rob member states of their veto power © Reuters

Tax havens under attack
Brussels is planning to crack down on sweetheart tax arrangements in the EU by triggering a never before used legal instrument that will rob member states of their veto power over taxation policy. The European Commission is exploring invoking Article 116 of the EU treaty to press member states like the Netherlands, Luxembourg and Ireland to stop multinational tax avoidance. The news comes ahead of a major tax ruling on Wednesday, when the EU’s General Court will decide whether Brussels was right to order Apple to pay €13bn in back taxes to the Irish government. The FT has the scoop:

“Officials told the Financial Times that the plans, under Article 116 of the EU’s treaty, were at a very early stage but would aim to identify certain competitive national tax schemes as a distortion of the single market. It is likely to trigger intense controversy among member states, which fiercely protect their taxation powers.”

Hong Kong response
The EU is to work up possible retaliatory measures against China over its imposition of a sweeping new national security law on Hong Kong, bloc foreign policy chief Josep Borrell said after a meeting of foreign ministers in Brussels on Monday. The plans, which build on Franco-German proposals floated last week, focus on helping civil society — and stop well short of economic sanctions on Beijing. Potential moves include curbing exports of equipment such as rubber bullets to Hong Kong police; making it easier for activists to stay long-term in the EU; changing extradition rules to make it harder for Beijing to extract political opponents from the bloc; and offering more education scholarships for Hong Kongers to study in Europe. (FT)

Turkey troubles
Foreign ministers also swung behind a twin-track approach to Turkey that seeks to calm rising tensions while also preparing potential responses if relations deteriorate further, Mr Borrell said. The gathering underscored friction with Turkey on matters including Libya’s civil war, Ankara’s drilling for gas in waters off Cyprus — and president Recep Tayyip Erdogan’s plan to turn Istanbul’s Hagia Sophia, one of the world’s greatest examples of Byzantine Christian architecture, into a mosque. (FT)

Two-speed recovery
Europe’s shoppers have returned to the high street but the continent’s exporters are still suffering, according to data published over the past week that suggests the recovery from the pandemic economic crash will be patchy. The FT also launches its UK economic tracker on Tuesday. It’s a chart-packed page showing how different sectors and consumer behaviours are rebounding (or not) as the UK eases out of lockdown. It will be updated regularly as new data comes in from the various sources.

© Reuters

Russia reversal
Vladimir Putin has delayed his flagship $360bn national investment plan by six years as the pandemic pitches Russia into recession and leaves a hole in the federal budget. (FT)

Brexit bill
British companies trading with Europe will have to absorb a post-Brexit bureaucracy burden and fill in an extra 215m customs declarations at a cost of about £7bn a year, according to UK government officials. (FT)

Positive discrimination
Res Publica Europa, an organisation made up of EU civil servants and professionals working in European affairs, wants the European Commission to turn promises into actions on racial diversity. In an open letter, they call on the EU executive to introduce positive discrimination when hiring trainees and introduce unconscious bias training for all staff. It comes after commission president Ursula von der Leyen last month asked what could be done to ensure the “EU institutions better represent the diversity of our European societies”. (EU Observer)

Chopped up
The EU’s planned €26bn solvency support instrument to help struggling companies is facing the chop at this week’s summit, the FT has reported. But in a new paper from the Jacques Delors Institute, authors Theresa Küspert and Nils Redeker say the instrument could be a “powerful” tool in the recovery if it were better designed to do the job. They argue the risk of the SSI “providing free lunch bailouts for owners and private investors” would be curbed if the instrument were bought under strict political control and tightly targeted to help stricken companies such as ailing banks.


Get alerts on Global Economy when a new story is published

Copyright The Financial Times Limited 2020. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article